Production capacity is what?

The production capacity is the maximum quantity of a certain product, the usual assortment having the corresponding quality that the enterprise produces over a certain period of time, with the condition that all equipment was used with maximum efficiency, and the labor resources are optimal. Let us clarify the definition.

It should be noted that the production capacity is the output of not "just what" products, but the one that corresponds to the standards established in the industry, the enterprise or the state (for this product) and does not have any deviations or defects. In addition, it must be manufactured in accordance with the proper production technology.

Another point. The production capacity is the output of a type of product that is characteristic of this type of enterprise. And no other.

And finally: production capacity is a product that is produced in a certain period of time. It can be anything from an hour to a year. This will depend on the type of enterprise. For example, the production capacity of a shipyard will be meaningless to measure in hours, but for an enterprise for the production of mineral water this approach will be acceptable.

The production capacity of equipment installed in the enterprise directly affects the work of the entire organization as a whole. After all, if one of the devices (electric welding machines, electric furnaces or other mechanisms does not work), then production can significantly slow down, and even stop altogether. Changes in the work, even the most seemingly insignificant detail in the enterprise, can "feel" the production capacity. This, in fact, resembles the work of our body, where each "detail" for something is responsible.

However, we need to determine which volume of products must be met. This figure will be determined by the requirements and requests provided by customers to a particular enterprise. And also the influence on the definition of the volume of production will be exerted by the demand for this type of product. The whole process is called "capacity utilization". Determination of the amount of this load is made by an incredible amount of calculations, so as not to produce excess output or to avoid a defect.

One of the most important indicators with which you can determine the economic efficiency of production capacity, as well as its work and success in the enterprise in general, was, is and will be a return on assets. It is the ratio of commodity (or, as it is called, gross) output to the average annual cost of that part of the assets that an enterprise plans to use for a long period of time. These assets are also referred to as "fixed productive assets". They are not just involved in the production of goods and transfer their value to them. In addition, they do not lose their consumer value and their natural form in the production process. This is their economic essence.