12 terms

bottleneck operations

an operation in a sequence of operations whose capacity is lower than that of the other operations

break-even point (BEP)

the volume of output at which total cost and total revenue are equal

capacity

the upper limit or ceiling on the load that an operating unit can handle

capacity cushion

extra capacity used to offset demand uncertainty

cash flow

the difference between cash received from sales and otehr sources, and cash outflow for labor, material, overhead, and taxes

constraint

something that limits the performance of a process or system in achieving its goals

design capacity

the maximum designed service capacity or output rate

diseconomies of scale

if the output rate is more than the optimal level, increasing the output rate results in increasing average unit costs

economies of scale

if the output rate is less than the optimal level, increasing the output rate results in decreasing average unit costs

effective capacity

design capacity minus personal and other allowances

indifference point

the quantity that would make two alternatives equivalent

present value

the sum, in current value, of all future cash flows of an investment proposal