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How is demonstrated capacity calculated?
Final output divided by initial input
Sum of standard hours per time bucket divided by time buckets
Productivity rate multiplied by available hours
Total units produced divided by labor costs
The correct answer is: Sum of standard hours per time bucket divided by time buckets
Demonstrated capacity is typically calculated by assessing the actual output produced over a specific period, accounting for the production standards set for that timeframe. The calculation involves taking the sum of the standard hours required for the production of items in specific intervals, known as time buckets, and then dividing this sum by the number of time buckets. This method provides a more reliable reflection of capacity since it considers the operational efficiencies and inefficiencies experienced during production. Using the sum of standard hours within defined time frames allows a business to understand its actual work output relative to the time spent, providing insights into productivity levels. It focuses on the measurable work done against the expected or standard work time, thus presenting a realistic view of the operational capacity. The other choices do not offer a relevant or accurate method for calculating demonstrated capacity. They either misrepresent productivity measures or focus on unrelated factors that do not yield a valid assessment of a production capacity.