Page 93 - DMGT501_OPERATIONS_MANAGEMENT

Unit 3: Capacity Planning

7. Compare and contrast the expansionist and wait-n-see strategy. Notes
8. Critically examine the use of decision trees to determine capacity.
9. "The basis for decisions on outsourcing or vertical integration is knowledge of the true
cost of manufacturing goods internally against the cost of acquiring these goods from
suppliers". Discuss.
10. What are the basics that must be kept in mind while developing capacity alternatives?

11. Calculate the quantity to be produced and contribution margin from the data given below:
(a) Price per unit = 3500
(b) Fixed Costs = 10,20,000
(c) Estimated Profits= 3,90,000

(d) Total Cost = 30,00,000
(e) Targeted sales= 20,000 units
12. Complete the table given below:

Product Monthly Demand in Standard processing time Annual processing
units per unit in hrs time in hrs
A 200 4
B 5 5000
C 180 6000
D 220 8

13. 'Capacity is modified in response to demand'; and 'demand is modified in response to
capacity'. Which of these two statements do you consider to be correct? Why?
14. A factory owner is considering drilling a tube well. In the past, only 70 per cent of the
wells drilled up to a depth of 200' were successful in that area. However, on finding no
water some had drilled further up to 250', but only 20 per cent struck water at that depth.
The prevailing cost of drilling per foot is 500. The factory owner has calculated that in
case he does not get water from the tube well, he will have to pay 1,50,000 from the
public supply system.
The following decisions can be taken:
(a) Do not drill the well
(b) Drill up to 200', and

(c) If no water is found, drill up to 250'.
Draw an appropriate Decision Tree and determine what should be the strategy of the
factory owner.

15. What are the issues involved in designing a Mall? What lessons do they give you in
planning capacity for other service companies?
16. A glass factory specializing in crystal is experiencing a substantial backlog, and the firm's
management is considering three courses of action:
(a) Arrange for subcontracting
(b) Construct new facilities

(c) Do nothing (no change)

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