Practical capacity as the denominator, 480,000 dollars of idle cost reported apart from products, and a fall shortage ranked by throughput per roaster hour: AC505's Unit 6 capacity analysis worksheet. Searches like "ac 505 unit 6 assignment example", "ac505 unit 6 sample" and "ac505 unit 6 example" land here.
What a finished AC505 Unit 6 capacity analysis worksheet looks like
A four-part worksheet with a page of commentary. Part one computes the fixed roasting rate on four denominators: 273.97 dollars an hour on theoretical capacity of 8,760 hours, 400 on practical capacity of 6,000, 470.59 on normal use of 5,100 and 500 on the 4,800 hours budgeted. Part two shows the 1,200 idle hours at the practical rate, 480,000 dollars, as a separate line instead of spreading it over each pound roasted. Part three splits the year: 2,500 practical hours from August to December, fully used with 400 hours of orders left over, and 3,500 hours from January to July with only 2,300 used. Part four ranks almonds, cashews and peanuts by throughput per roaster hour for the fall shortage.
How a AC505 Unit 6 example is structured
The worksheet argues from denominator to accountability to constraint. Its opening shows that the rate per hour depends entirely on which capacity figure divides the fixed cost, and that the budgeted rate charges products 0.10 dollars a pound of almonds for time they never used, about 264,000 dollars a year on external almond sales alone. Practical capacity is chosen and defended, after Kaplan and Cooper's argument that unused capacity is a cost of the period, not of the product. Accountability follows: the second roaster was bought two years ago for projected orchard growth, so the idle cost is assigned to that executive decision rather than to the ingredients manager or to prices. The seasonal split then shows annual averages hiding both waste and shortage. The constraint section ranks products by throughput per roaster hour and defers cashews, not peanuts, in the fall.
Four denominators, four rates
Theoretical, practical, normal and budgeted capacity give 273.97, 400, 470.59 and 500 dollars an hour. Only practical capacity allows for scheduled maintenance, sanitation and changeovers while ignoring demand, which is why the worksheet adopts it.
A line for empty hours
Twelve hundred idle hours at 400 dollars appear as 480,000 of unused capacity below product costs. Loaded into the rate instead, they would raise every quoted price and invite the lost orders that leave still more hours empty.
Whose decision the cost belongs to
The second roaster was approved two years ago on projected orchard acreage. Its idle cost is assigned to that executive decision, reported where the people who made it will see it, and not to the division manager who runs the roasters.
Slack in spring, shortage in fall
January to July uses 2,300 of 3,500 practical hours. August to December uses all 2,500 and turns away 400 hours of holiday orders. The annual figure of 80 percent use describes neither season.
Ranked by the roaster hour
Per pound, cashews lead at 1.50 dollars, almonds follow at 1.25 and peanuts trail at 0.70. Per roaster hour the order changes, almonds 1,250, peanuts 1,120, cashews 900, because cashews roast at only 600 pounds an hour.
Deferring cashews, not peanuts
Cutting 400 fall hours of cashews gives up 360,000 dollars of throughput; cutting peanuts would give up 448,000. The worksheet recommends deferring cashew orders where contracts allow and names the two customers whose terms do not.
Where marks go in AC505 Unit 6
An undefended denominator costs more on this worksheet than any arithmetic slip, because AC505 typically treats the capacity level as the decision and the rate as its consequence. Budgeted volume used as the base, with no mention of the idle cost it buries in product prices, costs the analysis marks. Many answers report unused capacity and stop, when the question asked is who should carry it; credit usually follows an owner named and a reason tied to the decision that created the capacity. Annual utilization quoted as one figure hides the seasonal constraint the case usually plants. In the constraint section, ranking products by margin per pound rather than per constrained hour picks the wrong product to defer, and here that mistake costs 88,000 dollars.
Get a AC505 Unit 6 example written to your instructions
Are the idle hours real, and whose are they? With the Unit 6 capacity figures, the fixed cost pool, budgeted and actual activity, any product data for a busy period and the rubric, the worksheet comes back in 24-48h computing each denominator, assigning idle cost to an owner and ranking the constraint. First samples cost nothing.
AC505 Unit 6 questions, answered
Why use practical capacity rather than budgeted volume?
Practical capacity is what the resources can actually deliver after allowances for maintenance and setups, independent of how much demand shows up. Dividing by it keeps product costs stable and reports idle time as its own line. Budgeted volume spreads idle cost across the units made, so costs rise when demand falls, which can push prices up at the worst moment.
What is throughput in the theory of constraints?
Revenue minus truly variable costs, usually materials and anything else that changes directly with each unit. When one resource limits output, products are ranked by throughput per unit of that resource, here per roaster hour. A product with the best margin per pound can rank last if it moves through the constraint slowly, which is exactly what happens to cashews.
Should unused capacity cost ever be charged to a product?
Rarely, and only when a product line caused the capacity to be held, such as a dedicated line kept for one customer's contract. Otherwise it belongs to whoever decided to buy or keep the capacity. Charging it to products makes them look more expensive in slow periods and hides from executives what their capacity decisions are costing.