1. Capacity Planning

5. Efficiency and Utilization Both measures expressed as percentages Actual output Efficiency = Effective capacity Actual output Utilization = Design capacity

11. Evaluating Alternatives Minimum cost & optimal operating rate are functions of size of production unit. Average cost per unit 0 Small plant Medium plant Large plant Output rate Figure 5.4

12. Cost-Volume Relationships Figure 5.5a Amount ($) 0 Q (volume in units) Total cost = VC + FC Total variable cost (VC) Fixed cost (FC)

13. Cost-Volume Relationships Figure 5.5b Amount ($) Q (volume in units) 0 Total revenue

14. Cost-Volume Relationships Figure 5.5c Amount ($) Q (volume in units) 0 BEP units Profit Total revenue Total cost

15. Break-Even Problem with Step Fixed Costs Figure 5.6a Quantity FC + VC = TC FC + VC = TC FC + VC = TC Step fixed costs and variable costs. 1 machine 2 machines 3 machines

16. Break-Even Problem with Step Fixed Costs Figure 5.6b $ TC TC TC BEP 2 BEP 3 TR Quantity 1 2 3 Multiple break-even points