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A new ‘Food and Beverage’ Industry at Tokyo City is planning to set up its production...

A new ‘Food and Beverage’ Industry at Tokyo City is planning to set up its production capacity based on local demand. After a survey of market demand, it is found that the present (year 2012) demand per day is 500 items. The company is targeting its capacity 10 years ahead (that is, to capable of satisfying the demand in year 2022). It is expected that due to increase in population, the demand will increase by 20% of the present in year 2022. What should be the design production capacity of the industry in accordance with the above condition? State clearly your assumptions.

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Answer #1

The following assumptions are made:

(1) From year 2013 to year 2021, demand will remain unchanged at 500 units.

(2) The company will be able to increase capacity to meet higher demand in year 2021

(3) In year 2022, the company will utilize full capacity, so will sell entire output produced that year , and

(4) No unforeseen factors will change the expected increase in demand. Therefore,

In year 2022 (after 10 years), Production capacity (Demand) = 500 x (1.20) = 600

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