BUS-A 202 Midterm: A202 EXAM 2 STUDY GUIDE
Document Summary
Chapter 6: decision making in the short term. Short term: companies deal with gaps between demand and supply and anticipate the imbalance look to mitigate peaks (ex: holidays) and valleys. *these gaps exist because capacity is fixed in the short term. Capacity: the maximum volume of activity that a company can sustain with the available resources. Valleys: decisions dealing with low demand and excess capacity can make more product but no demand. Peaks: decisions dealing with excess demand that is greater than capacity orders are more than can make. Excess capacity handled by special orders, more components made in house, and price discounts. Excess demand mitigated by temporary help, outsourcing a process, and raising prices. Special orders are one time requests that consider the additional revenue and the relevant costs. If units of idle capacity are >units in the special order, then no opportunity cost.
