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Q. 5-1PE

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Operations And Supply Chain Management
Found in: Page 128
Operations And Supply Chain Management

Operations And Supply Chain Management

Book edition 14th
Author(s) F. Robert Jacobs
Pages 800 pages
ISBN 9780078024023

Short Answer

The level of capacity for which a process was designed

and at which it operates at minimum cost.

Best operating level.

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Step by Step Solution

Best operating level

The best operating level is the ability under which the system is built, as well as consequently the production capacity at which the overall price per unit is minimal.

How best operating level operates at minimum cost

The best operating level for such a facility is the highest production volume only with the lowest average price. Companies strive to operate as near to this value as possible. If demand is continuously higher than the optimum processing level, capacity is increased to bring costs closer to the best working level.

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