Abstract
Return on investment has conventionally been one of the most common economic indicators used in process capability and capacity planning. Although this indicator is used in the evaluation of completed plans, it is of no value in revising plans, and is also difficult to apply to the optimization of plans that include capabilities. This paper proposes what could be termed a "relative annual profit", at the level at which production ratio exceeds the minimal production ratio required for recovery of fixed costs as deduced by production process capability. At this point, the indicator will provide information needed for process capability and capacity planning. Further, the following becomes apparent through a comparison of the directions being taken by the relative annual profit and return on investment (discounted method). The former is applied if the situation is such that hte (depreciation rate in fixed costs) × (number of years in the plan) are growing ; the latter if the trend is in the opposite direction.
