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SRQ3
Doctor J. is considering purchasing a new blood analysis machine to test for HIV; it will cost $60,000. He
estimates that he could charge $25.00 for an office visit to have a patient's blood analyzed, while the actual cost
of a blood analysis would be $5.00.
1. If this new blood analysis machine has design and effective capacities of 6,000 and 5,000 blood analyses per
year, respectively, and Dr. J. expects to perform 4,500 HIV blood analyses each year, what will be the
utilization of this machine?
A. 0%
B. 75%
C. 83%
D. 90%
E. 100%
A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime
location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new
location. The county is paid a $75 commission for each new prisoner they process.
2. How many prisoners would they have to process annually to break even at this new location?
A. 5,000
B. 8,000
C. 2,000
D. 4,000
E. 6,000
3. The maximum possible output given a product mix, scheduling difficulties, quality factors, and so on, is:
A. utilization
B. design capacity
C. efficiency
D. effective capacity
E. available capacity
4. Given the following information, what would efficiency be?
Effective capacity = 80 units per day
Design capacity = 100 units per day
Utilization = 48%
A. 20%
B. 35%
C. 48%
D. 60%
E. 80%
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View Full Document5. Which of these factors wouldn't be subtracted from design capacity when calculating effective capacity?
A. personal time
B. maintenance
C. scrap
D. operating hours per day
E. all of the above would be subtracted in the calculation
6. A reason for the importance of capacity decisions is that capacity:
A. limits the rate of output possible
B. affects operating costs
C. is a major determinant of initial costs
D. is a longterm commitment of resources
E. all of the above
7. Outsourcing some production is a means of _________ a capacity constraint.
A. Identifying
B. Modifying
C. Supporting
D. Overcoming
E. Repeating
The owner of Firewood To Go is considering buying a hydraulic wood splitter which sells for $50,000. He
figures it will cost an additional $100 per cord to purchase and split wood with this machine, while he can sell
each cord of split wood for $125.
8. If, for this machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and actual
output is anticipated to be 35 cords per day, what would be its utilization?
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 Spring '10
 C.SCHNIEDER

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