Section 4 Reducing Risk with Incremental Changes 1) Changes in capacity may lead, lag, or straddle the demand. Answer: TRUE Diff: 2 Objective: LO1 Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes 2) Of the four approaches to capacity expansion, the approach that "straddles" demand: A) uses incremental expansion. B) uses one-step expansion. C) at some times leads demand, and at other times lags. D) works best when demand is not growing but is stable. E) Choices A and C are both correct. Answer: E Diff: 2 Objective: LO1 Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes 3) Which of the following is FALSE regarding capacity expansion? A) "Average" capacity sometimes leads demand, sometimes lags it. B) If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. C) Total cost comparisons are a rather direct method of comparing capacity alternatives. D) Capacity may only be added in large chunks. E) In manufacturing, excess capacity can be used to do more setups, shorten production runs, and drive down inventory costs. Answer: D Diff: 2 Key Term: Capacity 4) Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy? A) They are cheaper. B) They are more accurate. C) They delay capital expenditure. D) They increase demand. E) All of the above are advantages. Answer: C Diff: 2 Objective: LO1 Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes S7-22 5) What is a common method used to increase capacity with a lag strategy? A) overtime B) subcontracting C) new facilities D) new machinery E) A and B Answer: E Diff: 2 Objective: LO1 Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes 6) The capacity planning strategy that delays adding capacity until capacity is below demand, then adds a capacity increment so that capacity is above demand, is said to ________ demand. Answer: straddle Diff: 2 Objective: LO1 Learning Outcome: Explain options for managing bottlenecks and managing capacity in service and manufacturing processes S7-23