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Flashcards in Chapter 9 (Capacity) Deck (6)
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What is capacity

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)


What is Capacity Management?

- 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



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


Design Capacity vs Effective capacity

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


Capacity considerations

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


Breakeven Analysis

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,