Chapter 9 (Capacity)

Question 1

What is capacity

Answer 1

The maximum output that a business can produce in a given period with the available resource.
Capacity is measured in production units (eg. 1,000 cars per month)

Question 2

What is Capacity Management?

Answer 2

• Ability to meet customer’s requirement with the available resources (Machine, factory, labour, raw materials etc) at hand
  Time and Capacity are 2 main constraints in capacity management

Question 3

Throughput

Answer 3

= Number of units a facility can hold, receive, store or produce in a period of time

Question 4

Design Capacity vs Effective capacity

Answer 4

Design Capacity = maximum output of a system (expressed as rate)
Effective Capacity is the current operating capacity (often lower than design capacity)

Question 5

Capacity considerations

Answer 5

• Forecast demand accurately
• Understand the technology and capacity increments
• Find the optimum operating level (volume)
• Break Even Analysis

Question 6

Breakeven Analysis

Answer 6

The point at which the business will be able to cover all its expenses and begin to make a profit. The breakeven point is when the revenue equals all business cost (including fixed cost and variable cost)

Fixed cost = plant, equipments, rent, taxes,
Variable cost = employees, units produce,