CPIM Practice Exam

How is demonstrated capacity calculated based on standard production hours per week?

1. By summing actual hours worked only.

2. By averaging the output over time periods.

3. By multiplying production units by standard hours.

4. By dividing total hours by the number of workers.

The correct answer is: By averaging the output over time periods.

Demonstrated capacity is calculated by considering how much output can realistically be achieved over time, which involves analyzing performance over specific periods. This approach emphasizes consistency and stability in production rates, allowing for a more accurate representation of what can be expected based on historical data. Averaging output over time provides insight into typical production levels under normal operating conditions, taking into account variations in demand, workforce efficiency, and operational challenges. The other options, while related to production and capacity, do not represent the standard method for calculating demonstrated capacity. Summing actual hours worked focuses solely on the labor input without considering output. Multiplying production units by standard hours may relate more to theoretical capacity rather than actual demonstrated capacity, which depends on real-world performance. Dividing total hours by the number of workers connects more with labor productivity calculations rather than capacity measurements.