Production & Operations Management (Chapter 2)

FORMULA DESIGN CAPACITY = (DAYS X SHIFT X HOURS IN SHIFTS X OUTPUT PER HOUR) UTILIZATION ACTUAL OUPUT / DESIGN CAPACITY * 100% EFFICIENCY ACTUAL OUTPUT / EFFECTIVE CAPACITY * 100% EXPECTED PRODUCTION = EFFECTIVE CAPACITY X RATE OF EFFICIENCY A small company produces key chains for international markets. Usually they exported about 480,000 units per week. The assembly lines working six days a week, with three shifts per day. They produce 2,400 units of key chains per 30-minutes. The effective capacity is 860,000 units. (a) Find the design capacity (b) The rate of utilization (c) The rate of efficiency (d) Find the expected production if the rate of efficiency was reduced to 85%