The change in level of work-in-process (WIP) inventory is the most appropriate indicator to evaluate

the effectiveness of the detailed capacity planning processes for a firm that produces a moderate

variety of products to stock in a single plant. Detailed capacity planning is the process of determining

the quantity and timing of resources, such as labor, equipment, and materials, needed to execute the

master production schedule (MPS) at the work center level1. The MPS is a plan that specifies the

quantity and timing of end items to be produced in a given time period2. The change in level of WIP

inventory is a measure of the difference between the amount of WIP inventory at the beginning and

at the end of a period3. WIP inventory consists of partially completed products or components that

are waiting for further processing or assembly.

The change in level of WIP inventory can indicate how well the detailed capacity planning processes

are aligned with the MPS and the actual demand. A positive change in WIP inventory means that

more products or components are being produced than consumed, which implies that there is excess

capacity or insufficient demand. A negative change in WIP inventory means that more products or

components are being consumed than produced, which implies that there is insufficient capacity or

excess demand. A zero or minimal change in WIP inventory means that the production and

consumption rates are balanced, which implies that there is optimal capacity and demand.

Therefore, by monitoring the change in level of WIP inventory, the firm can evaluate whether its

detailed capacity planning processes are effective in meeting customer needs and expectations, as

well as minimizing inventory costs and maximizing resource utilization.

The other options are not as appropriate indicators to evaluate the effectiveness of the detailed

capacity planning processes for a firm that produces a moderate variety of products to stock in a

single plant. Units of output per direct labor hour is a measure of labor productivity, which indicates

how efficiently labor is used to produce output. However, labor productivity does not reflect the

effectiveness of detailed capacity planning processes, because it does not account for other factors

that affect production, such as equipment, materials, quality, or demand. Percentage of master

schedule attained is a measure of schedule performance, which indicates how well the actual

production matches the planned production. However, schedule performance does not reflect the

effectiveness of detailed capacity planning processes, because it does not account for other factors

that affect production, such as capacity constraints, resource availability, or customer satisfaction.

Level of finished goods inventory is a measure of inventory management, which indicates how much

inventory is available to meet customer orders. However, finished goods inventory does not reflect

the effectiveness of detailed capacity planning processes, because it does not account for other

factors that affect production, such as product variety, lead time, or quality.

Reference: Detail Capacity Planning - Capacity Planning - Gaebler.com Resources …; Master

Production Schedule (MPS) Definition | Operations & Supply Chain Dictionary; Work-in-Process

Inventory: Definition & Example - Video & Lesson Transcript | Study.com; [Work-in-Process (WIP)

Definition - Investopedia]; [Labor Productivity Definition - Investopedia]; [Labor Productivity:

Definition & Statistics - Video & Lesson Transcript | Study.com]; [Schedule Performance Index (SPI)

Definition - Investopedia]; [Schedule Performance Index (SPI) & Cost Performance Index (CPI) in

Project Cost Management]; [Finished Goods Inventory: Definition & Formula - Video & Lesson

Transcript | Study.com]; [Finished Goods Inventory: Definition & Example - Video & Lesson Transcript

| Study.com].