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Capacity
The throughput, or the number of units a facility can hold, receive, store, or produce in a period of time
Capacity determines
the fixed cost
Capacity determines if
demand will be satisfied
Design Capacity
The maximum theoretical output of a system
Effective capacity
The capacity a firm expects to achieve given current operating constraints
Effective capacity is often
lower than design capacity because design capacity is the max
Capacity is expressed as a
rate
3 capacity rates
Hourly Capacity (units/hours), Weekly capacity (units/week), monthly capacity (units/month)
Utalization is the
% of design capacity actually achieved
Efficiency is the
% of effective capacity actually achieved
Utilization (effective capacity) formula
Actual Output / Design Capacity
Efficiency output formula
actual output / effective capacity
Capacity Analysis
Determines the throughput capacity of workstations in a system and the entire system as a whole
Bottleneck is a
limiting factor or constraint
A bottleneck has the ___ effective capacity in a system
lowest
The capacity is the # of units,,
produced per sec/min/hour/day/week
The bottleneck time is the time
taken by the slowest workstation to produce ONE unit
The throughput time of the System is the
TOTAL TIME it takes for ONE unit to get through production (Start to end)
The 3 processes
Sequential, Parallel, and Simultaneous
Throughput time is the sum of
Sum of past time on the longest path
Bottleneck is the operation with the
Longest (slowest) process time
System capacity is the
inverse of the bottleneck time
Throughput time is the total..
time through the longest path in the system, assuming no waiting
Break-Even analysis is the technique for
evaluating process and equipment alternatives
Break-Even Analysis objective is to
find the point in $ and units at which cost equals revenue
Break-Even analysis is understanding how profits and losses
change for each option as the total # of units varies
Fixed costs are
costs that continue even if no units are produced
Examples of fixed costs
Depreciation, Taxes, Debt, Mortgage payments, rent
Variable Costs are
Costs that vary with the volume of units produced
Example of variable costs
Labor, materials, portion of utilities
Varaible costs contribution is the
difference between selling price and variable costs
Revenue function begins at the origin and proceeds upward to the right increasing
by selling price of each unit
Revenue function crosses the
Total cost line is the break-even point