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Understanding Design Capacity and Efficiency

Design capacity refers to the maximum achievable production level under perfect conditions, which are rarely achieved in practice. Operating at design capacity can lead to quick wear and breakdowns. Capacity efficiency is a ratio that measures actual output versus effective capacity, and indicates how effectively a company utilizes its capacity. It is calculated by dividing actual output by effective capacity to get a percentage of efficiency.

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Annakay Fairclough
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36 views1 page

Understanding Design Capacity and Efficiency

Design capacity refers to the maximum achievable production level under perfect conditions, which are rarely achieved in practice. Operating at design capacity can lead to quick wear and breakdowns. Capacity efficiency is a ratio that measures actual output versus effective capacity, and indicates how effectively a company utilizes its capacity. It is calculated by dividing actual output by effective capacity to get a percentage of efficiency.

Uploaded by

Annakay Fairclough
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

What is design capacity?

Design capacity is the total achievable capacity under perfect conditions. Normally,
perfect conditions are not achievable, and few organizations operate for any period of time at
design capacity. Furthermore, operating at designed capacity can cause rapid wear and
breakdowns. Operating at design capacity essentially means operating at the organization`s
productive limits.

What is capacity efficiency?

Capacity efficiency is a ratio of production output to effective capacity. It is a measure of


effective management in utilizing effective capacity. It is calculated using the following formula:
EFFICIENCY = ACTUAL OUTPUT/EFFECTIVE CAPACITY

EXAMPLE

The effective capacity of a candy manufacturing company is 1,000 units of candy per hour;
however, it actually produces only 850 units per hour. The efficiency of the candy manufacturing
company can be computed in the following manner:

EFFICIENCY = ACTUAL OUTPUT/EFFECTIVE CAPACITY

EFFICIENCY = 850/1,500 = 85%

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