Question 12.SP.4: Capacity requirements planning. Given the following producti...
Capacity requirements planning. Given the following production schedule in units and the production standards for labor and machine time for this product, determine the labor and machine capacity requirements for each week. Then compute the percent utilization of labor and machines in each week if labor capacity is 200 hours per week and machine capacity is 250 hours per week.
| Production Schedule: | ||||
| Week | 1 | 2 | 3 | 4 |
| Quantity | 200 | 300 | 100 | 150 |
| Standard Times: | |
| Labor | .5 hour/unit |
| Machine | 1.0 hour/unit |
Convert the quantity requirements into labor and machine requirements by multiplying the quantity requirements by the respective standard times (i.e., multiply each quantity by .5 to obtain the labor hours and multiply each quantity by 1.0 to obtain the machine hours):
| Week | 1 | 2 | 3 | 4 |
| Quantity | 200 | 300 | 100 | 150 |
| Labor hours | 100 | 150 | 50 | 75 |
| Machine hours | 200 | 300 | 100 | 150 |
To compute utilization, divide the capacity requirements by the available capacity (200 hours per week for labor and 250 hours per week for machine) and multiply by 100. The results are
| Week | 1 | 2 | 3 | 4 |
| Labor | 50% | 75% | 25% | 37.5% |
| Machine | 80% | 120% | 40% | 60% |
Note that machine capacity in week 2 is overutilized (i.e., capacity is insufficient) because the utilization exceeds 100 percent. To compensate, some production could be shifted to weeks 1 and/or 3 where labor and machine time are available.