Home > Operations Management > Chapter Five – Strategic Capacity Planning for Products and Services (terms)

Chapter Five – Strategic Capacity Planning for Products and Services (terms)

Bottleneck operation – an operation in a sequence of operations whose capacity is lower than that of the other operations

Break-even point (BEP) – the volume of output at which total cost and total revenue are equal

Capacity – the upper limit or ceiling on the load that an operating unit can handle

Capacity cushion – extra demand intended to offset uncertainty; =100% – Utilization

Cash flow – the difference between cash received from sales and other sources, and cash outflow for labor, material, overhead, and taxes

Diseconomies of scale – if the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs

Economies of scale – if the output rate is less than the optimal level, increasing the output rate results in decreasing average unit costs

Outsource – obtain a good or service from an external provider, (make or buy?)

Present value – the sum, in current value, of all future cash flows of an investment proposal

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