Capacity cushion can be determined by:
A. capacity - actual demand
B. capacity - estimated demand
C. capacity - strategic demand
D. capacity - predicted demand
E. capacity - expected demand
Answer (2)
The capacity cushion is calculated by subtracting actual demand from total capacity, making option A: 'capacity - actual demand' the correct choice. This measurement helps businesses understand their surplus capacity to handle fluctuations in demand. It is crucial for effective resource management.
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The concept of a capacity cushion is primarily used in operations management and pertains to how a business manages its production capabilities in relation to demand. A capacity cushion is the amount of reserve capacity a business maintains to handle unforeseen increases in demand or temporary losses of production capacity.
Calculating the capacity cushion involves comparing a business’s capacity with its expected demand. This allows managers to determine if there is a buffer in cases where demand might exceed capacity levels.
In this case, the correct formula from the given options for determining capacity cushion is the difference between capacity and the expected or estimated demand, since businesses typically plan around expected conditions to ensure they can meet future demand without overextending resources. Thus, the correct choice is:
(E) capacity - expected demand ;
