
Concept explainers
To determine: Difference between design capacity and effective capacity
Introduction: Capacity planning is the process of planning the required production output based on the requirement or the demand that is predicted.

Explanation of Solution
Difference between design capacity and effective capacity are as follows:
Design capacity is the capability or ability of an organization. It is the maximum number of units or quantity that an organization can produce within a particular period. However, it is theoretical judgment based on the capability of the firm.
Effective capacity is the maximum outcome that the firm can produce with a particular period based on the constraints such as quality, handling of materials, and delay. It is the real outcome of the firm.
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Chapter 5 Solutions
Operations Management (Comp. Instructor's Edition)
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