Scribd
Upload
1K views11 pages

Chapter 5 Developing Capacity Alternatives (Clara)

The document discusses developing capacity alternatives and evaluating those alternatives. It recommends 1) designing flexibility into systems, 2) considering the life cycle stage, 3) taking a systems approach to capacity changes, 4) preparing for capacity "chunks", and 5) smoothing capacity requirements. It also discusses evaluating alternatives using cost-volume analysis, which examines the relationships between costs, revenues, volume, and profit using formulas like total cost, variable cost, total revenue, and break-even quantity.

Uploaded by

Joshua Naragdag Collado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
1K views11 pages

Chapter 5 Developing Capacity Alternatives (Clara)

The document discusses developing capacity alternatives and evaluating those alternatives. It recommends 1) designing flexibility into systems, 2) considering the life cycle stage, 3) taking a systems approach to capacity changes, 4) preparing for capacity "chunks", and 5) smoothing capacity requirements. It also discusses evaluating alternatives using cost-volume analysis, which examines the relationships between costs, revenues, volume, and profit using formulas like total cost, variable cost, total revenue, and break-even quantity.

Uploaded by

Joshua Naragdag Collado
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

DEVELOPING

CAPACITY
ALTERNATIVES
1. Design flexibility into system
2. Take of stage of life cycle into account
• Introduction phase- difficult to determine
• Growth phase – is the over all market experience rapid growth
• Maturity phase- size of market levels off, and organizations tend to have stable market shares.
• Decline phase- an organization is faced with underutilization of capacity due to declining demand
3. Take a “big picture” (i.e., systems) approach to capacity changes
• Bottleneck- an operation in a sequence of operations whose capacity is lower that of the other
operations
4. Prepare to deal with capacity “chunks”
5. Attempt to smooth out capacity requirements
6. Identify the optimal operating level
7. Choose a strategy if expansion is involved
EVALUATING ALTERNATIVES

• Cost-Volume Analysis- focuses on relationships between cost, revenue, and volume of


out-put
Cost-volume symbols
FC= Fixed cost TR=Total revenue P= Profit
VC-=Total variable cost R= Revenue per unit
v= Variable cost per unit Q= Quantity or volume of output
TC=Total cost QBEP= Break-even quantity
COST-VOLUME RELATIONSHIP
FORMULA
• TC=FC+VC
• VC=Q×v
• TR=R×Q
• P=TR-TC= R×Q- (FC+v×Q)
• P= Q(R-v) –FC
• Q= P+FC
R-v
• QBED =FC
R-v

You might also like