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Questions and Answers
Calculate the maximum labor requirement for bottling operations in year 5 based on the data provided.
Calculate the maximum labor requirement for bottling operations in year 5 based on the data provided.
The maximum labor requirement for bottling operations in year 5 is 4.62 operators.
What is the maximum capacity utilization for bottling operations in year 5, and why is this significant for the company?
What is the maximum capacity utilization for bottling operations in year 5, and why is this significant for the company?
The maximum capacity utilization for bottling operations in year 5 is 77%. This is significant as it provides the company with a buffer to manage unexpected challenges like demand fluctuations and machine failures.
Discuss the implications of a maximum capacity utilization of 94% for plastic bag operations in year 5.
Discuss the implications of a maximum capacity utilization of 94% for plastic bag operations in year 5.
A maximum capacity utilization of 94% for plastic bag operations indicates that the company may face challenges in handling unexpected issues, potentially leading to production delays.
Identify the maximum machine requirement for plastic bags in year 4 and 5, and outline the company's machine capacity situation.
Identify the maximum machine requirement for plastic bags in year 4 and 5, and outline the company's machine capacity situation.
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How does the labor requirement for the plastic bags operation change from year 1 to year 5?
How does the labor requirement for the plastic bags operation change from year 1 to year 5?
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Study Notes
Capacity Management Definitions
- Capacity is the ability to hold, receive, store, or accommodate
- In business, capacity is the maximum amount of output achievable over a period of time.
- It considers both inputs and outputs.
Capacity Planning Time Durations
- Long Range: Greater than one year, strategic decisions, example: acquiring buildings, equipment, facilities
- Intermediate Range: Monthly or quarterly plans covering the next six to eighteen months, tactical decisions, example: hiring, new tools, minor equipment purchases, subcontracting
- Short Range: Less than one month, operational decisions, example: overtime, personnel transfer, alternative production routings
Strategic Capacity Planning
- Determines the overall level of capital-intensive resources needed to support long-range competitive strategy.
Capacity Utilization
- Reveals how well a firm is using its potential capacity
- Ratio of capacity used to Best operating level
- Best operating level: capacity level for which the process was designed (the output level at which average unit cost is minimized)
- A high capacity utilization rate (close to 100%) means the firm is operating at full capacity
- A low capacity utilization rate means there is excess capacity.
Economies of Scale
- Cost advantages businesses obtain as they increase their size.
- As a plant gets larger, and volume increases, average cost per unit drops because:
- Fixed cost per unit drops (equipment, etc.)
- Lower Operating and capital costs
Learning Objectives
- Understand the concept of capacity and the importance of capacity management
- Explain the impact of economies of scale on a firm
- Determine capacity requirements
- Understand how to use decision trees to analyze capacity alternatives
- Describe the difference in planning capacity for manufacturing vs. service firms
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Description
This quiz explores key definitions and concepts related to capacity management and planning. It covers various time durations for capacity planning, including long-range, intermediate, and short-range planning. Additionally, it discusses strategic capacity planning and how capacity utilization is measured in a business context.
