GCM 372 Lecture Notes - Lecture 11: Capacity Planning, Opportunity Cost, Fluorescent Lamp

• School: Ryerson University
• Department: Graphic Communication
• Course: GCM 372
• Professor: Nikita

Document Summary

Capacity determines the rate of output of a process and the speed at which the firm can pull completed work out of the process, thus significantly affecting a firm"s ability to meet customer demand. Capacity planning is a process that is imperative to determine if a plant can take on a current job that is much larger than normal, and also to handle future growth. Ensure the right quantity of goods or services is produced at the right time and with the best use of available resources. Too little capacity results in the inability to meet customer demand. Too much capacity leads to high production costs and inefficient use of resources. In developing a long-range capacity plan, a firm must make a basic economic trade-off between the cost of capacity and the opportunity cost of not having adequate capacity. Opportunity cost is defined as the cost of an alternative that must be forgone in order to pursue a certain action.