Question

1. What is required for effective management of capacity and why?

2. Define theoretical and practical capacity, as used in calculating volume variances.

Answer 1

1. What is required for effective management of capacity and why?

Capacity Management

Capacity Management is all about ensuring that adequate resources are available for all business processes and the quality, performance and service levels of each business procedure is met. The key to success of any business lies in effective management and planning of available resources to the company. In other word, the capacity management is about squeezing maximum capacity from existing infrastructure.

There are important items involved in this process as follows:

1) Businesses should plan their requirement and acquire sufficient resources

2) Businesses should envisage future demands and be ready to meet these requirements

3) Capacity management and planning should provide cost effective solutions

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