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CMA Intermediate · Operations Management and Strategic Management · Designing of Operational Systems and Control

Sharma Auto Parts has a design capacity of 1,000 units per day. Effective capacity is 800 units per day and actual output is 680 units per day. What are the utilisation (against design capacity) and efficiency (against effective capacity)?

Utilisation is 68% (680 divided by design capacity of 1,000) and efficiency is 85% (680 divided by effective capacity of 800). Utilisation uses design capacity as the base, while efficiency uses effective capacity, and their link is 85% times 80% equals 68%.

  1. AUtilisation 68%; efficiency 85%Correct
  2. BUtilisation 85%; efficiency 68%
  3. CUtilisation 80%; efficiency 85%
  4. DUtilisation 68%; efficiency 80%

Explanation

Utilisation = actual/design = 680/1000 = 68%. Efficiency = actual/effective = 680/800 = 85%. Check: 0.85 x 0.80 = 0.68. Option 2 swaps the two measures; the others use wrong bases.

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