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Flashcards in Capsim Questions Deck (35):

Plant utilization - what does low plant utilization mean?

actual output/total output (%)

Total output is capacity (not times two)

So max Plant utilization is 200%!

Low plant utilization - not producing at full capacity


First shift and second shift

First shift capacity = capacity next round

Second shift = first shift * 2


Total Plant capacity for high tech

2 x capacity next round (Sum)


Inventory Carrying costs

Where can you see if product stocked out?

• Inventory carrying costs = 12% rate

if product stocked out, there will be 0 inventory carrying costs


How much is 2nd shift paid?

50% premium over first shift


How much does labour increase every year

5%, but automation decreases labour costs by 10%


How to tell if overproduced or underproduced using potential vs actual chart?

Overproduced - CANNOT TELL

Underproduced - below potential


if asking as a % of sales, do you use product sales or total sales?

Product sales!


Market capitalization?

Share Price Close x # of shares


Earnings per share?

profit/# of shares


Buying and selling capacity

Increasing automation

• Buying capacity takes 1 year to deliver (in thousands)
o Costs $6/unit + $4/automation

• Selling capacity happens right away
o Receive 65% of original purchase price (35% discount)

To calculate how much you get back

0.65 x cost
where cost = units x (6 + 4(automation rating))

To increase automation:
cost = units x ($4 x # of increases)


how many shares can be issued each year? (max)

• Can issue up to 20% of outstanding shares/round


What is ideal spot based on?

perceptual map - size and performance


How much awareness does each new product generate?

o New products creates 25% awareness at no cost


Forecasting formula (demand analysis)

Total demand Next Round = Total Industry Demand + (total industry demand*growth rate)

Forecast = total demand next round * market share


Rough and fine cut circles

• Rough Cut Circle – radius = 4 units
• Fine Cut Circle – radius = 2.5 units


equity calculation for Book Value

• Book Value = equity/shares outstanding


Drifting across perceptual map Given Starting performance and size (drift rate for low tech is +0.5 performance and -0.5 size and high tech is +0.7 and - 0.7)

Beginning position?

Add to performance 0.5 or 0.7 each year

Subtract from size 0.5 or 0.7 each year


Situation Analysis included

perceptual map
ideal spot
demand analysis
capacity analysis
margin analysis
consumer report



Mission Statement: Premium products for mainstream customers. Our brands will withstand the test of time

Differentiator with product life cycle focus (MAINSTREAM)

without mainstream = broad differentiator


Mission Statement: low-priced products for the industry. Our brands offer solid value.

Broad Cost leader (both segments)
- mention only price, so focus is on cost


Mission Statement: reliable products for low tech customers. Our brands offer value

Niche cost leader (low tech)
- says low tech


Mission statement: premium products for technology orientated customers. Our brands define the cutting edge

Niche Differentiator (high tech)
- says premium and tech orientated customers


Mission statement: reliable products for mainstream customers. Our brands offer value

Cost leader with product lifecycle focus
- mainstream = life cycle focus


Mission statements:
- Reliable
- Mainstream
- Premium

Reliable - Cost Leader
Mainstream - life cycle focus
Premium - differentiator


When demand exceeds supply, a seller's market emerges. This means that customers are willing to accept _____ but not willing to accept

WIlling to accept: low scoring products (price and MTBF)

Not willing to accept: if outside Rought cut circle


How much will bank lend?

Bank will lend up to 75% A/R and 50% this year's inventory (works out to be about 15% of combined value of this year's and last year's total DL and DM)

Final step: bankers increase borrowing limit by 20% for room for expansion


Retiring Stock

cannot exceed lesser of 5% outstanding shares or total equity; charged 1.5% brokerage fee


Issuing stock is there a brokerage fee?

yes, 5%


Emergency loan penalty in addition to current debt rate?



Issuing bonds is there a brokerage fee? Lend up to what % of collateral?

yes, 5%

lend up to 80% of capacity and equipment

Retiring debt is 1.5%


Increasing MTBF increases what?

material costs, $0.30 for every addition 1000 hours


What happens for every $1 above price range? $10 above price range?

1$ above lose 10% customer survey score

up to $10 = demand is zero
(9.99 is okay)


MTBF 1000 hours below segmend guideline?

Up to 5000 hours from range?

lose 20% of customer survey score

Up to 5000 hours = demand falls to zero
(4999 is okay)


Decreasing time of A/R reduces customer survey score

90 to 60 to 30 days to 0 days

no reduction to 0.7% reduction to 7% reduction to 40% reduction