CPIM Practice Exam

A work center produces for 400 hours out of 500 hours available. What is the work center's utilization rate?

1. 72 percent

2. 80 percent

3. 90 percent

4. 125 percent

The correct answer is: 80 percent

To determine the utilization rate of the work center, you need to divide the actual production hours by the available hours. Utilization is a measure of how effectively a work center is using its available capacity. In this case, the work center produces for 400 hours and has 500 hours available. The calculation for utilization is as follows: Utilization Rate = (Actual Hours Used / Available Hours) x 100 Utilization Rate = (400 / 500) x 100 Utilization Rate = 0.8 x 100 Utilization Rate = 80 percent Therefore, this logic shows that the work center is effectively using 80 percent of its available capacity to produce goods, which reflects a healthy utilization rate for operations. This is significant because it indicates that while the work center is producing efficiently, there is still a portion of available capacity that can potentially be utilized for increased production without exceeding its limits.