Reason for difference in amount of activity by effective and operating level calculations. Concept Introduction : Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

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Answer 1

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Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

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Answer 2

Question

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

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Answer 3

Question

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

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Answer 4

Question

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

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Answer 5

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

Answer 6

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

Answer 7

Chapter 5, Problem 1DQ

Summary Introduction

Interpretation: Reason for difference in amount of activity by effective and operating level calculations.

Concept Introduction:

Design capacity represents the theoretical capacity of a system. The design capacity is the maximum output that the system was built to produce. It is the capacity of the system that works under perfect working conditions.

Answer 8

Expert Solution & Answer

Explanation of Solution

Effective capacity represents the potential of a system to utilize its designed capacity. The effective capacity will be less than the designed capacity. In other words, it is the percentage of designed capacity utilized by a system under regular working conditions.

Optimal operating level:

It is the level at which the average cost per unit of a product is the lowest possible level. At this level, the organization’s total sale is equal to its total cost. In other words, the optimal operating level is the level at which the organization neither earns nor incurs a loss.

The operation at the effective capacity and the operating level need not be the same for the following reasons:

The optimal operating level does not represent the maximum operating level of the system.
The optimal operating level is determined by the costs associated with the production. On the other hand, the effective capacity is the maximum output under regular working conditions and does not consider the costs.
Operating at the optimal level does not generate revenue to the organization, However, effective capacity above the optimal operating level will generate profit.

The operation at the effective capacity and the optimal operating level need not be the same. It is because the effective capacity should be greater than the optimal operating level to generate revenue.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 5 - Prob. 1DQ Ch. 5 - Prob. 2DQ Ch. 5 - Prob. 3DQ Ch. 5 - Prob. 4DQ Ch. 5 - Prob. 5DQ Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Prob. 3P

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