Determine the utilization and the efficiency for each of these situations: a. A

Question

Determine the utilization and the efficiency for each of these situations:

a. A loan processing operation that processes an average of 7 loans per day. The operation has a design capacity of 15 loans per day and an effective capacity of 12 loans per day. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

b. A furnace repair team that services an average of 2 furnaces a day if the design capacity is 10 furnaces a day and the effective capacity is 6 furnaces a day. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)

c. Would you say that systems that have higher efficiency ratios than other systems will always have higher utilization ratios than those other systems?

Explanation / Answer

Solution:

(a) Utilization = Actual output / Design capacity

Efficiency = Actual output / Effective capacity

Given;

Actual output = 7 loans per day

Design capacity = 15 loans per day

Effective capacity = 12 loans per day

Putting the given values in the above formula, we get,

Utilization = (7 / 15) x 100 = 46.7%

Efficiency = (7 / 12) x 100 = 58.3%

(b) Actual output = 2 furnaces per day

Design capacity = 10 furnaces per day

Effective capacity = 6 furnaces per day

Putting the given values in the above formula, we get,

Utilization = (2 / 10) x 100 = 20%

Efficiency = (2 / 6) x 100 = 33.3%

(c) This is not necessarily true. If the design capacity is relatively high, the utilization could be low even though the efficiency was high.

Explanation: The above statement can be proved using the formula of utilization and efficiency. In calculating utilization if the design capacity is high, the utilization will be low. However, since efficiency is not dependent on design capacity, it can still be high.

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