mod 3 Flashcards
Explain the relationship between capacity and economies of scale.
Capacity refers to the maximum output a facility or system can handle. Economies of scale occur when increasing production leads to lower average costs per unit. As capacity increases, fixed costs (e.g., equipment, overhead) are spread over a larger number of units, leading to reduced costs and more efficient operations.
Which capacity time horizon
short-term, medium-term, or long-term planning
Total cost formula
TotalCost=FixedCosts+(VariableCostperUnit×NumberofUnitsProduced)
Compare design and effective capacity:
design capacity: the maximum output under ideal conditions, reflecting the theoretical upper limit.
effective capacity: he maximum output considering real-world factors like downtime, maintenance, and quality standards. It’s usually less than design capacity.
Which is a larger value: efficiency or utilization? Why?
Efficiency: is often larger than utilization because efficiency measures how well a system uses its available capacity
utilization: looks at how much of the total available capacity is used. Utilization considers external factors like demand, so it tends to be lower.
what part of the process defines capacity
the bottleneck or the slowest part of the process
how is work center throughput related to capacity
throughput: actual output produced by work center
capacity: max potential output if everything is running at max potential
If work center capacity=6 units/hr, throughput= ____ (answer 10 min/unit)
60mins/6 units=10 minutes to produce.
If work center throughput = 5 min/unit, capacity = 12 units/hr
60mins/5units=12 units per hour
What is the difference between parallel and synchronous work centers?
Parallel work centers involve multiple workstations operating simultaneously on separate units, increasing overall capacity without affecting the time per unit.
Synchronous work centers have multiple stations working in a coordinated sequence, where each station performs its part of the process on the same unit at the same time, often improving flow efficiency but not always increasing capacity.
How do you calculate process throughput?
Process throughput is calculated as the inverse of the process time per unit. For example, if it takes 10 minutes to produce one unit, the throughput is
60/10= 6 units per hour.
How does adding a parallel work center affect process throughput?
Adding a parallel work center increases throughput because multiple units can be processed simultaneously. The capacity (units per hour) increases as more resources are available to handle the same workload.
What does break-even mean?
Break-even is the point at which total revenue equals total costs, meaning the business covers its fixed and variable costs but does not yet make a profit.
What does it mean if the actual quantity is less than the break-even quantity?
the business is operating at a loss because it hasn’t generated enough revenue to cover all its costs.
if price = $5/unit, and the fixed cost is $100 and the variable cost is $1/unit break even=25 units
The break-even point is calculated by dividing the fixed costs by the contribution margin per unit
100/5-1= 25 units
