INFO 364 EXAM III Review

INFO 364 EXAM III Review - INFO 364 EXAM III Review Chapter...

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INFO 364 EXAM III Review Chapter 11: 1. Capacity : the ability to hold, receive, store, or accommodate a. Amount of output that a system is capable of achieving over a period of time 2. Strategic Capacity Planning : an approach for determining the overall capacity level of capital intensive resources (facilities, equipment, and overall labor force size) 3. Time Horizon of Capacity Planning a. Long Range i. Longer than 1 year ii. Building, Equipment, or facilities iii. Require top management participation and approval b. Intermediate Range i. Monthly or quarterly plan for the next 6 to 18 months ii. Hiring and layoffs, new tools, minor equipment purchase and subcontracting c. Short Range i. Less than 1 month, tied to daily or weekly scheduling process ii. Overtime, personnel transfer, alternative production routing 4. Capacity Utilization a. = Capacity Utilization Rate Capacity UsedBest Operating Level (shows how close a firm is to its best operating point) b. Capacity Used : rate of output actually achieved c. Best Operating Level : capacity for which the process was designed, and at which average unit cost is minimized d. e. 5. Economies and Diseconomies of Scale a. Economies of Scale i. As a plant gets larger and volume increases, the average cost per unit of output drops 1. Due to lower operating and capital cost, and the ability to fully utilize resources b. Diseconomies of Scale i. When a plant becomes too large and the average cost per unit of output begins to increase 1. Requires companies to discount the product or lay off employees c.
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