Hickory Manufacturing Company forecasts the following demand for a product (in thousands of units) over the next five years: Used from book Currently the manufacturer has seven machines that operate on a two-shift (eight hours each) basis. Twenty days per year are available for scheduled maintenance of equipment with no process output. Assume there are 250 workdays in a year. Each manufactured good takes 30 minutes to produce. a. What is the capacity of the factory

Based on the information given the capacity of the factory is 51,250 units.

a. Capacity in units

First step is to calculate capacity in machine hours

Capacity in machine hours = Number of workdays × Number of shifts per day× Number hours per shifts × Number of machines

Let plug in the formula

Capacity in machine hours= (250 days - 20 days) × 2 shifts × 8 hours × 7

Capacity in machine hours=230 days× 2 shifts × 8 hours × 7

Capacity in machine hours=25,760 machine hours

Second step is to calculate the capacity in units

Capacity in units=Capacity in machine hours×2 units per hour

Capacity in units=25,760 machine hours×2 units per hour

Capacity in units=51,520 units

b. Capacity level for the next five year

Year  Forecast demand × Capacity= Ratio

1          60,000/51,520=1.16

2         79,000/51,520=1.53

3          81,000/51,520=1.57

4          84,000/51,520=1.63

5          84,000/51,520=1.63

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51,520 units

Explanation:

a. The computation of the capacity of the factory is shown below:

Capacity of the factory = (Number of workdays in a year - number of given days) × number of hours × number of shifts × number of machines × basis

= (250 days - 20 days) × 8 hours × 2 shifts × 7 × 2

= 51,520 units

We simply applied the above formula to determine the capacity of the factory