Question: Which of the following is not a strategy to manage service capacity?

Answer: backordering. Backordering for services is simply shifting demand to a later period.

Question: Cost and competitive priorities reduce effective capacities.

Answer: False. Changes in competitive priorities can actually increase effective capacity.

Question: Increasing productivity and also quality will result in increased capacity.

Answer: True. Effective capacity can be increased over time by these and similar factors.

Question: The maximum possible output given a product mix, scheduling difficulties, quality factors, and so on is:

Answer: effective capacity. Effective capacity reflects the realities of the production environment.

Question: The ratio of actual output to effective capacity is:

Answer: Efficiency. Efficiency measures the usage of effective capacity.

Question: The ratio of actual output to design capacity is:

Answer: Utilization. Utilization measures the usage of design capacity.

Question: Utilization is defined as the ratio of effective capacity to design capacity.

Answer: False. Utilization is the ratio of output to design capacity.

Question: If the output rate is increased but the average unit costs also increase, we are experiencing:

Answer: Diseconomies of Scale. Diseconomies of scale involve producing above the optimal production rate.

Question: Efficiency is defined as the ratio of:

Answer: actual output to effective capacity. Efficiency measures the usage of effective capacity.

Question: Short-term considerations in determining capacity requirements include:

Answer: seasonal demand variations. Trends, cycles, and fundamental strategic changes are long-term considerations.