Question 6 which of the following would tend to

• Question 6
Which of the following would tend to reduce effective capacity?
Selected
greater variety in the product line
suppliers that provide more reliable delivery performance
improved production quality
employees that are fully trained
greater variety in the product line
reduced changeover times All things being equal, product line variety reduces effective capacity.
• Question 7
The owner of a greenhouse and nursery is considering whether to spend $6,000 to
acquire the licensing rights to grow a new variety of rosebush, which she could then sell

for $6 each. Per-unit variable cost would be $3. If her available land has design and
effective capacities of 3,000 and 2,000 rosebushes per year, respectively, and she expects
to be 80 percent efficient in her use of this land, how many rosebushes does Rose plan to
grow each year on this land?
• Question 8
Given the following information, what would efficiency be?
Effective capacity = 80 units per day
Design capacity = 100 units per day
Utilization = 48 percent

20 percent
Efficiency = (actual output / effective capacity) × 100% = (48/80) ×
100% = 60%
• Question 9
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. How many
cords of wood would he have to split with this machine to break even?
• Question 10
Which of the following is a key question in capacity planning?
Selected
When do we need the capacity?
Should we change capacity all at once, or through several small

changes?
Where do we need the capacity?
When do we need the capacity?
Who will pay for the capacity change?
Should we make the product in-house or outsource it?
What kind, how much, and when is it needed are the three key questions
in capacity planning.
• Question 11
The owner of a greenhouse and nursery is considering whether to spend $6,000 to
acquire the licensing rights to grow a new variety of rosebush, which she could then sell
for $6 each. Per-unit variable cost would be $3. How many rosebushes would she have
to produce and sell in order to make a profit of $6,000?
• Question 12

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. If, for this
machine, design capacity is 50 cords per day, effective capacity is 40 cords per day, and
actual output is expected to be 32 cords per day, what would be its efficiency?