Practical Operations Management
Practical Operations Management
2nd Edition
ISBN: 9781939297136
Author: Simpson
Publisher: HERCHER PUBLISHING,INCORPORATED
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Chapter 5, Problem 1P
Summary Introduction

Interpretation:To name one potential determinant of the varying capacity

Concept Introduction:

Design Capacity − Design Capacity of a facility is the maximum output of the facility under ideal conditions. There is no delay or stoppages in the process and everything run smoothly.

Effective Capacity − Effective capacity of the facility is actual capacity at which the facility is running or is expected to run. It is always less than the Design Capacity. This is so because of the many factors that delays the process or stops the smooth functioning of the facility

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A company has a factory that is designed so that it is most efi cient (average unit cost is minimized) when producing 15,000 units of output each month. However, it has an absolute maximum output capability of 17,250 units per month, and can produce as little as 7,000 units per month without corporate headquarters shifting production to another plant. If the factory produces 10,925 units in October, what is the capacity utilization rate in October for this factory?
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