Activity-Resource Usage Model

The activity resource usage model separates resources used into two categories: (1) flexible resources for which resources demanded and used equal the resources supplied, and (2) committed resources which are acquired in advance of usage.

Example: Electricity to run sewing machines in a clothing manufacturing factory is a flexible resource. It is used and supplied when needed. Increased production will require more electricity, decreased production will require less electricity. However, the sewing machines themselves are a committed resource. They are purchased in advance of usage. Increased or decreased production (within the relevant range) will not affect the number of sewing machines.

The cost of flexible resources is relevant, the cost of committed resources - within the relevant range - is not relevant. However, if the relevant range is exceeded, for example, more of the committed resource must be acquired. This additional committed resource spending would be relevant.

For each of the following situations, determine whether the resources involved are flexible or committed.

1.	A company builds a factory with sufficient capacity to make 40,000 units per year. - Select your answer -flexiblecommittedItem 1
2.	A factory makes shampoo and orders direct materials on a just in time (JIT) basis. - Select your answer -flexiblecommittedItem 2
3.	A florist finds that the two weeks around Valentine's Day are very busy and hires additional help for those two weeks. - Select your answer -flexiblecommittedItem 3
4.	A factory normally ramps up production for three months before Christmas. Finished Goods inventory increases and requires additional warehouse space. The factory rents this space for six month periods (a time period required by the warehouse owner.) - Select your answer -flexiblecommittedItem 4
5.	A factory hired three industrial engineers capable of handling 10,000 engineering change orders per year each. Currently, the factory is using 27,000 engineering change orders. - Select your answer -flexiblecommitted