Question

Which of the following is not a reason why capacity decisions are so important?

1) To meet customer demand
2) To optimize resource utilization
3) To minimize production costs
4) To increase employee satisfaction

Answer 1

The primary reason for capacity decisions that is not correct is 'To increase employee satisfaction.' Capacity decisions prioritize meeting customer demand, optimizing resource utilization, and minimizing production costs, which directly affect operational efficiency and profitability, rather than focusing on employee morale.

Step-by-step explanation:

Capacity decisions are critical in business operations because they determine a company's ability to meet customer demand, optimize resource utilization, and minimize production costs. Capacity decisions have a direct impact on the operational efficiency and profitability of a business.

Among the reasons listed, the option that is not a primary reason for capacity decisions is "To increase employee satisfaction." While employee satisfaction is important to overall business operations, it is generally not a direct factor when making capacity decisions. Capacity decisions tend to focus more on operational capabilities and financial impacts rather than employee morale.

The best practices in capacity planning involve selecting production technology that minimizes total cost, as exemplified by the reference to choosing production technology 3 with the lowest total cost. This echoes the efficiency sought in capacity decisions to ensure competitive operation in the market.