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Each product requires a certain number of SCU to produce. Typical products require in the range of 0.1 - 2.0 SCU per unit depending upon the product specifications and the degree of cost reduction incorporated in the design. A good rule is that for each $300 of product prime cost, a product requires 1 SCU to produce. For example your adventurer bike has a product prime cost of $300 so it requires exactly 1 SCU for every unit produced in a given year.
The following hypothetical example demonstrates how overall factory capacity requirements can be determined.
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Product 1 |
Product 2 |
Total |
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Desired Production in Units |
20,000 |
10,000 |
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SCU per Unit |
1 |
3 |
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Required Capacity in SCU |
20,000 |
30,000 |
_________ |
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Required Available Capacity (SCU) |
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50,000 |
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Plus Wastage Estimate (SCU) |
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30,000 |
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Overall Required Factory Capacity (SCU) |
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80,000 |
Worker and plant capacity can be used in a variety of combinations to produce the same amount of factory capacity. The optimum level of capital and labor intensity will depend upon a number of factors including the overall costs and impacts on flexibility of each.