Which of the following best describes practical capacity?
A) It is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time and shutdowns for holidays.
B) It is the level of capacity based on producing at full efficiency all the time.
C) It is the level of capacity utilization that satisfies average customer demand over a period that includes seasonal, cyclical, and trend factors.
D) It is the level of capacity utilization that managers expect for the current budget period, which is typically one year.

Question

Quizplus · Accepted Answer

Practical capacity refers to the level of capacity that takes into account unavoidable operating interruptions, such as scheduled maintenance time and shutdowns for holidays. It is a more realistic measure of capacity than theoretical capacity, which assumes that production can occur at full efficiency all the time. Practical capacity also accounts for variations in demand over time, including seasonal, cyclical, and trend factors. It is typically used to determine the level of capacity that can be used to meet average customer demand over a given period.

Which of the Following Best Describes Practical Capacity