Determine the utilization and the efficiency for each of those situations. A loa

Question

Determine the utilization and the efficiency for each of those situations. A loan processing operation that processes an average of 3 loans per day. The operation has a design capacity of 16 loans per day and an effective capacity of 14 loans per day. A furnace repair team that services an average of 4 furnaces a day it the design capacity is 7 furnaces a day and the effective capacity is 6 furnaces a day. 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

Utilization = Actual output / Design capacity

Efficiency = Actual output / Effective capacity

a) Actual output = 3 loans per day

Design capacity = 16 loans per day

Effective capacity = 14 loans per day

Utilization = Actual output / Design capacity = 3/16 = 18.8%

Efficiency = Actual output / Effective capacity = 3/14= 21.4%

b) Actual output = 4 furnaces a day

Design capacity = 7 furnaces a day

Effective capacity = 6 furnaces a day

Utilization = Actual output / Design capacity = 4/7 = 57.1%

Efficiency = Actual output / Effective capacity = 4/6= 66.7%

c) This is not necessiarily true . If the design capacity is relatively higher , the utilization could be lower even though the efficiency was higher.

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