CPIM Practice Exam

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Which formula calculates rated capacity?

Utilization × Efficiency
Available Time × Utilization × Efficiency
Projected output × Standard hours
Labor hours × Production rate

The correct answer is: Available Time × Utilization × Efficiency

The formula for calculating rated capacity is represented by the product of Available Time, Utilization, and Efficiency. This approach takes into account the total time that is available for production, adjusts it for the percentage of that time that is actually utilized, and further refines it based on how efficiently the resources are being used. Available Time is the total time available for production, which includes working hours minus any downtime. Utilization measures how much of this available time is actively used for production, often expressed as a percentage of total available time. Efficiency, on the other hand, looks at how effectively the output is generated compared to the maximum potential output possible within that utilized time. Combining these factors provides a comprehensive view of rated capacity because it reflects not only how much time is available but also how well that time is used, leading to a realistic measure of an organization's production potential. This contrasts with other options that do not fully encapsulate the operational factors that lead to rated capacity.