Demonstrated Capacity

➥To examine the previous production records and to use that information as the available capacity of the work center.

Formula : Demonstrated Capacity = Total standard hours of work / The previous weeks or Number of period. 

Formula : Efficiency =standard hours of work produced/hours actually worked x 100 

• EXAMPLE PROBLEM

Over the previous 4 weeks, a work center produced 120, 130, 150, and 140 standard hours of work. What is the demonstrated capacity of the work center?

Answer :

Demonstrated capacity =(120 130 150 + 140)/4 =135 standard hours

• EXAMPLE PROBLEM

Over a 4-week period, a work center produced 540 standard hours of work, was available for work 640 hours, and actually worked 480 hours. Calculate the utilization and the efficiency of the work center.

Answer:

Utilization=hours actually worked/ available hours x 100 =480 / 640 x 100 % 75 %

Efficiency =standard hours of work produced/hours actually worked x 100 =540/ 480x 100 % =112.5 %

Credit by : Aishah