Which concept is the process of measuring production output against the capacity plan and taking action if variance exceeds pre-established limits?

• A. Capacity control
• B. Capacity management
• C. Carrying cost
• D. Cash flow

Answer: (A)

The concept being tested is capacity control. It focuses on monitoring actual production output against what the capacity plan anticipated and taking corrective actions when the difference exceeds predefined tolerance limits. This keeps the shop floor aligned with the plan by identifying variances, analyzing their causes, and applying measures such as rescheduling, reallocating resources, or expediting work to bring performance back in line with the plan.

Capacity management, by contrast, is broader and more strategic, concerned with ensuring the right level of capacity exists over time to meet demand. Carrying cost and cash flow relate to inventory holding and financial aspects, not to the day-to-day comparison of actual output to the capacity plan.