TB Chapter 5 - Capacity Planning Quiz

The term capacity refers to the maximum quantity an operating unit can process over a given period of time.

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Capacity decisions are usually one-time decisions; once they have been made, we know the limits of our operations.

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Stating capacity in dollar amounts generally results in a consistent measure of capacity regardless of the actual units of measure.

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Design capacity refers to the maximum output that can possibly be attained.

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If the unit cost to buy something is less than the variable cost to make it, the decision to make or buy is based solely on the fixed costs.

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Increasing productivity and also quality will result in increased capacity.

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Utilization is defined as the ratio of effective capacity to design capacity.

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Increasing capacity just before a bottleneck operation will improve the output of the process.

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An example of an external factor that influences effective capacity is government safety regulations.

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Cost and competitive priorities reduce effective capacities.

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