FARE 3310 Chapter Notes - Chapter 7: Capacity Utilization, Job Shop, Variable Cost
15 Dec 2013
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Capacity decisions have a real impact on the ability the organization to meet future demands for products and services. Capacity decisions affect operating costs and ease of management. Capacity is usually a major determinant of capital cost. When multiple output are produced, state capacities in terms of each product or choose a major product, or use availability of major input. No single measure of capacity will be appropriate in every situation. Types of capacity: design capacity- the maximum output that can be attained under ideal conditions effective capacity-the maximum possible output given operating hours, product mix, scheduling difficulties and expected delays and machine maintenance. Efficiency- the ratio of actual output to effective capacity. Utilization- the ratio of actual output to design capacity or used time of available time. Example- determine the utilization and efficiency of each of the following situations: a loan processing operation processes an average of 7 loans per day.
