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CMA Intermediate · Operations Management and Strategic Management · Operations Planning

Which statement about capacity planning is correct?

Design capacity is the maximum possible output under ideal conditions, whereas effective capacity is lower because it allows for maintenance, product mix, changeovers and scheduling losses. Effective capacity therefore does not exceed design capacity, and utilisation is measured against design capacity.

  1. AEffective capacity is always greater than design capacity
  2. BDesign capacity is the maximum output under ideal conditions, while effective capacity allows for product mix, maintenance and scheduling lossesCorrect
  3. CCapacity planning concerns only the short-run daily scheduling of jobs
  4. DUtilisation is measured as actual output divided by effective capacity

Explanation

Design capacity is the ideal maximum; effective capacity is lower after allowing for maintenance, changeovers and product mix. Effective capacity cannot exceed design capacity, and utilisation uses design capacity, not effective capacity.

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