Capacity Requirements Planning - CRP

AAA

DEFINITION of 'Capacity Requirements Planning - CRP'

An accounting method used to determine the available production capacity of a company. Capacity requirement planning first assesses the schedule of production that has been planned upon by the company. Then it analyzes the company's actual production capacity and weighs the two against each other to see if the schedule can be completed with the current production capacity.

INVESTOPEDIA EXPLAINS 'Capacity Requirements Planning - CRP'

Capacity requirements planning is an important part of ensuring that a company can meet production expectations. If a firm fails to take this step before production, it may find itself unexpectedly unable to produce the amount of goods that it has agreed to make with its current facilities. This can obviously be disastrous for the firm if it is unable to meet the requirements of a contract or other formal production agreement.

RELATED TERMS
  1. Production Rate

    In manufacturing, the number of goods that can be produced during ...
  2. Production Per Share

    A mathematical ratio used in the oil and gas industry to refer ...
  3. Manufacturing Production

    The creation and assembly of components and finished products ...
  4. Production Gap

    An economic analytical term denoting the degree of relative deviation ...
  5. Production Efficiency

    1. An economic level at which the economy can no longer produce ...
  6. Ex Gratia Payment

    A payment made to an individual by an organization, government, ...
RELATED FAQS
  1. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  2. What can working capital turnover ratios tell a trader?

    A company's working capital turnover ratio is traditionally positively correlated with business performance. A high, or better ... Read Full Answer >>
  3. What is a negative write-off?

    A negative write-off is a write-off conducted by a company or accountant after deciding not to pay back an individual or ... Read Full Answer >>
  4. What metrics can be used when evaluating a telecommunications company to ensure its ...

    Cash flow analysis has been transformed since the widespread introduction of statements of cash flow, and investors have ... Read Full Answer >>
  5. How do you record adjustments for accrued revenue?

    An accountant records adjustments for accrued revenues through debit and credit journal entries in defined accounting periods ... Read Full Answer >>
  6. What do I do if I think an accountant is in violation of the Generally Accepted Accounting ...

    The Financial Accounting Standards Board (FASB) promulgates generally accepted accounting principles (GAAP) in the United ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Harvesting Crop Production Reports

    Find out what grain investors need to know to analyze USDA reports.
  2. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  3. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  4. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.
  5. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  6. Economics

    Understanding Management by Objectives

    Management by objectives is a process in which a manager and an employee agree on specific performance goals and then develop a plan to reach those goals.
  7. Economics

    Understanding Historical Cost

    Historical cost equals the original purchase price of an asset recorded on a company’s balance sheet.
  8. Economics

    What Does Going Concern Mean?

    Going concern is a concept used in business and accounting to describe the fiscal health of a company.
  9. Economics

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.
  10. Economics

    Explaining Capital Reserve

    Capital reserve is an account on a company’s or municipality’s balance sheet that is dedicated to money reserved for long-term or large-scale projects.

You May Also Like

Hot Definitions
  1. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  2. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  3. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  4. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  5. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  6. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!