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CMA Intermediate · Operations Management and Strategic Management · Production Planning and Control

A plant has 2 shifts of 8 hours each per day and works 25 days a month. It has 10 machines. Effective capacity is 80% of design capacity because of planned maintenance and set-ups. Design capacity is based on all machine hours available. Actual output in a month is 3,200 machine-hours. What is the capacity utilisation (actual output as % of effective capacity)?

Capacity utilisation is 100%. Design capacity is 10 machines x 16 hours x 25 days = 4,000 machine-hours; effective capacity is 80% of this, or 3,200 hours. Actual output of 3,200 hours equals effective capacity, so utilisation against effective capacity is full.

  1. A80%
  2. B100%Correct
  3. C64%
  4. D125%

Explanation

Design capacity = 10 x 16 x 25 = 4,000 machine-hours. Effective capacity = 80% x 4,000 = 3,200 hours. Utilisation = 3,200/3,200 = 100%. Using design capacity as the base would give 80%, which is efficiency-type confusion, not utilisation against effective capacity.

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