1. Which best describes the concept of capacity?

• ❌ Square footage of a manufacturing factory

• ❌ Volume of products demanded

• ✅ Volume of production an organization is capable of

• ❌ Total fixed costs

Explanation: Capacity is about the ability to produce — how much output an organization can produce, not how much customers demand or the factory’s area.

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2. Which describes practical capacity?

• ❌ Maximum capacity that can be supplied

• ✅ Includes adjustments for normal logistics and operations

• ❌ Less than or equal to normal capacity

• ❌ Demand-based measure of capacity

Explanation: Practical capacity is the output possible after allowing for normal downtime, maintenance, breaks — i.e., adjustments for normal operations.

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3. Which describes normal capacity?

• ✅ Average demand for an organization’s product over multiple time periods

• ❌ Supply-based measure of capacity

• ❌ Includes adjustments for normal logistics and operations

• ❌ Period-specific demand for an organization’s product

Explanation: Normal capacity is typically demand-driven and measured as average demand over several periods (not a single period or a supply-only measure).

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4. Gina Corporation capacity measures: 1,000 / 950 / 1,200 / 800. Which must be true?

• ❌ Demand-based measures are greater than 1,000 units.

• ❌ Theoretical capacity is 1,000 units.

• ❌ Normal capacity is 950 units and budgeted capacity is 800 units.

• ✅ Practical capacity is less than 1,200 units.

Explanation: Among common capacity labels the largest number is usually the theoretical (max) capacity and practical capacity is typically less than theoretical — so practical capacity must be less than the highest value (1,200) in the list. The other mappings (which number equals which label) are not guaranteed from just four numbers.

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5. Which best describes a constraint?

• ✅ A limitation

• ❌ Specific to the long-term perspective

• ❌ Usually demand-based

• ✅ Usually supply-based

Explanation: A constraint is simply a limitation on achieving objectives; in operations it’s commonly a supply-side limitation (capacity, labor, materials), though constraints can be demand-related in some contexts.

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6. Jocelyn Corp. — which are demand-based constraints? (Check all that apply.)

• ❌ Market availability for electrical conductors

• ❌ Number of design engineers that Jocelyn currently employs

• ✅ Projected sales for flat-screen televisions

• ✅ Number of flat-screen manufacturers currently in the market

Explanation: Demand-based constraints relate to market demand (projected sales, number of buyers/manufacturers). Material availability and design engineers are supply-side constraints.

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7. True or false? Use contribution margin per unit of constrained resource to maximize use of the constrained resource.

• ✅ True

• ❌ False

Explanation: In the short/intermediate term, the correct prioritization metric is contribution margin per unit of the scarce resource (e.g., contribution per machine-hour) to maximize profit given the constraint.

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8. Ryan Inc. (100,000 capacity, demand >150,000) — which are true? (Check all that apply.)

• ✅ When adopting a short-run perspective, managers will rely on contribution margin per unit of scarce resource.

• ✅ When adopting a long-run perspective, managers will likely invest in more capacity to meet demand.

• ❌ Ryan likely faces a demand-based constraint.

Explanation: Demand exceeds capacity, so the short-run problem is allocation of scarce supply (use CM per constrained unit). Long-run remedy is adding capacity. This is a supply-based (capacity) constraint, not a demand-based one.

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🧾 Summary Table

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