Question

Question 1 (1 point)

The word capacity can mean different things to different people. In the context of Operations and Supply Chain management, an appropriate definition for the concept of capacity is to view it as the amount of available resource inputs relative to the requirements for outputs over a period of time such as a month

Question 1 options:

	True
	False

Question 2 (1 point)

Capacity planning is generally viewed in a number of different time durations. The longest view is called strategic capacity planning and covers a multi-year period. The main reason for doing this is to establish a seasonal capacity level for your employees.

Question 2 options:

	True
	False

Question 3 (1 point)

As a factory manager, you may not always want to run your facility at 100% of capacity. The reason is the equipment may have additional wear and tear, no maintenance can be done etc. Thus, it is better to strive for an output below 100% where the average cost per unit is the lowest. This level of capacity is also known as "best operating level"

Question 3 options:

	True
	False

Question 4 (1 point)

Many factory managers scale their factories in such a way that they always have spare capacity in relation to demand. This is considered a capacity cushion.

Question 4 options:

	True
	False

Question 5 (1 point)

Capacity flexibility means to rapidly increase or decrease the production from one level to another, or from one product to another. For example, if an automotive factory is set up to quickly switch from fuel efficient cars to gas guzzling pickup trucks depending on the demand, it is said to have _____

Question 5 options:

	Economies of scale
	Economies of shape
	Economies of shipping
	Economies of scope
	Economies of size

Answer 1

1) The correct answer is option a) True

An appropriate definition for the concept of capacity is to view it as the amount of available resource inputs relative to the requirements for outputs over a period of time such as a month.
Capacity is maximum level of the output which a company can sustain to produce a given product. It is the maximum output generated within available resources. Capacity is generally measured in production units (for example 10000 cars per month). Productive capacity could change, for example- when a machine is under maintenance, capacity is reduced.

Capacity needs to consider unexpected or seasonal or changes in demand. For example, Ice-cream factories in US need to quickly increase capacity in summer season.