Machine Capacity is the knowledge required by a manufacturer to gauge how efficient they are in being able to process orders on (most likely) a daily basis. It is NOT a function in a traditional accounting system but a tool used as a byproduct of setting up bills of material in the manufacturing process.
There are three components that go into figuring daily machine capacity:
1. Capacity in hours
2. Standard number of minutes it takes to make one product unit (or SAM)
3. Average Line efficiency
Let’s say you have three machines and you run them 8 hours a day. That gives a maximum of 24 machine hours.
Let’s also say it takes a normal half hour run to make 30 widgets. That averages out to one minute a widget, or 60 in a full hour.
Finally, let’s say your line efficiency is 75%. Your daily capacity, then, is: 60 widgets an hour x 3 machines = 180 widgets max per hour x 8 hours = 1440 x 75% efficiency = 1080 widgets daily capacity.
This means you can take in orders for 1080 widgets that will allow you to turn it over and bill in a day’s time. If you are taking in orders only for 500 widgets a day, then you are running at half capacity.
Average line efficiency is dependent on the number of machine operators, how many hours they work as opposed to maximum hours available to run the machines, how many pieces are produced and the standard number of minutes it takes to make one unit.
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