Question

1. Determine the utilization and the efficiency for each of these situations:

(a) A loan operation processes an average of 10 loans per day. The operation has a design capacity of 15 loans per day and an effective capacity of 12 loans per day.

(b) A furnace repair team that services an average of four furnaces a day if the design capacity is six furnaces a day and the effective capacity is five furnaces a day.

Answer 1

Solution 1: Design capacity refers to the theoretical maximum output of a system under ideal operating conditions.

Effective capacity refers to the maximum output of a system given its operating constraints.

Now, Utilization of a system refers to the degree or extent of actual output to design capacity. It can be calculated as :

Utilization = [Actual output/Design Capacity ] *100

And, Efficiency of a system refers to the degree of the actual output to effective capacity.

It can be calculated as :

Efficiency = [Actual output/Effective Capacity ] *100

Using the information given in the question and the above formulae , required figures are calculated as follows:

a) Actual or Average output = 10 loans per day

Effective capacity = 12 loans per day

Design Capacity = 15 loans per day

So, Utilization = [Actual output/Design Capacity ] *100 = [10/15] *100 = 66.67%

And Efficiency = [Actual output/Effective Capacity ] *100 = [10/12] *100 = 83.33%

b) Actual or Average output = 4 furnaces per day

Effective capacity = 5 furnaces per day

Design Capacity = 6 furnaces per day

So, Utilization = [Actual output/Design Capacity ] *100 = [4/6] *100 = 66.67%

And Efficiency = [Actual output/Effective Capacity ] *100 = [4/5] *100 = 80%

Note : Average number of loans processed and furnaces repaired represent Actual output .