If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity cushion?A. 25 percent B. 100 units per hour C. 75 percent D. 125 percent E. 133 percent


The correct answer is A.


Giving the following information:

The best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units.

To calculate the capacity cushion, we need to use the following formula:

Capacity cushion= spare capacity/ total capacity

Capacity cushion= 100/400= 0.25=25%

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d. 70%


It is best that the Operating point be around 70%.

The Operating Point is the ratio between the Number of Customers served per period (Mean Service Rate) to the number of customer Arrival per period (Mean Arrival Rate).

As the text says, it is better that Mean Service Rate exceed the Mean Arrival Rate and that the Mean Arrival Rate should not get too close to the Mean Service Rate. This makes 70% the best choice as Mean Arrival Rate is both less than and not too close to the Mean Service Rate.

Also, it would be better to have the Mean Service Rate at 70% because it would keep the servers/ waiters enough work to do but at the same time they can cater to new arrivals efficiently. If the Mean Arrival Rate was more than the Mean Service Rate, more people would be arriving than the Servers can serve. This can lead to mistakes and neglect of customers.

For these reasons, 70% is the best option.

If you need any clarification do react or comment.




Projects done by first worker per day = 1.5

Projects by second worker per day = 2

Projects by third worker per day = 3

Projects by fourth worker per day = 1.5

Actual projects completed per day = 2


Capacity utilization = frac{textup{Actual work done per day}}{textup{Maximum capacity per day


Capacity utilization = frac{textup{2}}{textup{1.5+2+3+1.5}}


Capacity utilization = frac{textup{2}}{textup{8}}


Capacity utilization = 0.25

= 25%

C. 1.25



Capacity utilization rate= actual output per hour / operating level rate per hour

Actually output per hour= 500units

Operating level rate per hour= 400


Capacity utilization rate= 500/400

Capacity utilization rate= 1.25



The given statement would be categorized as false as it asserts as inappropriate claim regarding the calculation of 'capacity utilization rate'. Capacity utilization rate aims to measure the literally realized proportion of potential/probable economic output. It is calculated by actual output being divided by the maximum possible output which is further multiplied by 100. Thus, it is written as:

{Capacity Utilization rate = "(Actual output/Maximum possible output)*100"}

Therefore, the given statement would be categorized as false.

The correct answer is letter "D": seeks to deliver superior value to buyers by satisfying their expectations on key attributes and beating rivals in meeting customer expectations on price.


Best-cost provider is a strategy by which suppliers attempt to provide consumers with high-quality products using methods of production that reduce costs. By doing so, suppliers would give more value to the money of their customers while meeting their expectations on the product purchased at the same time.

As production costs are lower, suppliers would be generating a comparative advantage.

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