BU385 Chapter Notes - Chapter 5: Fixed Cost, Variable Cost, Capacity Utilization
Document Summary
Capacity- the upper limit on the workload that an operating unit can handle. Capacity is also measured as maximum production rate. Maximum number of motorcycles that can be assembled in a particular plant per day. Capacity decisions have different time frames: long term, medium term, or short term. Long term usually refers to one to five years into the future. Long term capacity decisions include the plant size and major machines and equipment. Medium term usually refers to the next 12 months and the decisions include the nature and level of workforce. Short term related to the next few days and weeks, up to 12 weeks ahead and the decisions include the nature and level of staffing and work shifts. Strategic capacity planning systematic determination of facility and major equipment requirements to meet long-term demand for goods and services. In selecting a measure of capacity, it is better to choose one that does not require updating.
