Table 42
High Tech, Inc The Sawing Machines Operate on Two 8-Hour Shifts, 5 Days

question 15

Multiple Choice

Table 4.2
High Tech, Inc. is producing two types of products: A and B. Both are produced at the same sawing operation. Because of demand uncertainties, the operations manager obtained three demand forecasts (pessimistic, expected, and optimistic) . The demand forecasts, batch sizes (units/batch) , processing times (hr/unit) , and setup times (hr/batch) follow.

$\begin{array}{c}\quad\quad\quad\quad\quad\text { Time Standard } \quad\quad \quad\quad\quad\quad\quad \text { Demand Forecasts ( 000 units/yr) }\\\begin{array}{|l|l|l|l|l|l|l|}\hline \text { Product } & \text { Processing } & \text { Setup } & \text { Batch Size } & \text { Pessimistic } & \text { Expected } & \text { Optimistic } \\\hline \text { A } & .20 & 2.0 & 40 & 200 & 240 & 300 \\\text { B } & .15 & 3.0 & 50 & 160 & 180 & 200 \\\hline\end{array}\end{array}$
The sawing machines operate on two 8-hour shifts, 5 days per week, and 50 weeks per year. The manager wants to maintain a 10 percent capacity cushion.
-Using the information from Table 4.2,if the operation currently has 18 machines and the manager is willing to expand capacity by 20 percent through short-term options,what is the capacity gap (in terms of number of machines) if you assume the optimistic demand forecasts?

• A) less than or equal to 10
• B) more than 10 but less than or equal to 12
• C) more than 12 but less than or equal to 14
• D) more than 14

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Definitions:

Bonds Payable

A financial accounting term that refers to the outstanding debts a company owes to holders of its bond securities, due for repayment at some future date.

Premium

An amount paid for an insurance policy or the amount by which a bond or stock's price exceeds its face value.

Journal Entry

A record in financial accounting that documents a business transaction in the accounting records.

Face Value

The nominal or dollar value printed on a security, such as a bond or stock, representing its official worth.