CPIM Practice Exam

What does demonstrated capacity typically express?

1. Average output per defined timeframe

2. Daily operational costs

3. Quantitative input of resources used

4. Total inventory held

The correct answer is: Average output per defined timeframe

Demonstrated capacity expresses the average output per defined timeframe. This concept is crucial in production and operations management as it provides a measurable way to assess how much product an organization can produce in a specific period under regular operating conditions. By analyzing average output, businesses can better plan their production schedules, manage inventory, and align with customer demand. Average output is a key indicator of production efficiency and enables companies to identify possible improvements in operations. It helps organizations make informed decisions regarding resource allocation and operational capabilities, critical in achieving operational excellence. The other options, while they may relate to operations, do not accurately define demonstrated capacity. Daily operational costs pertain to the expenses incurred in running a business, which do not directly measure output. Quantitative input of resources used emphasizes what goes into production rather than the output produced, and total inventory held speaks to the quantities of products available but does not reflect production capacity.