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

Which statement about capacity planning is correct?

Effective capacity is usually lower than design capacity because it allows for realistic losses such as maintenance, set-ups, breaks and product mix. Design capacity is the theoretical maximum output under ideal conditions, so actual achievable output is normally below it.

  1. ALong-range capacity decisions are typically made after short-term scheduling is finalised
  2. BAdding capacity in large increments always lowers the risk of idle capacity
  3. CRated (effective) capacity is usually lower than design capacity because of allowances such as maintenance and set-upsCorrect
  4. DCapacity utilisation is always measured against design capacity and never against effective capacity

Explanation

Effective capacity allows for product mix, maintenance, breaks and set-ups, so it is normally below design capacity. Long-term capacity precedes scheduling, not follows it. Large increments raise the risk of idle capacity.

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