Certified Production & Operations Manager (POM) Practice Exam

When the current capacity exceeds desired capacity, the impact on profit opportunities is typically characterized by decreased opportunities for profit. This situation usually indicates that a company has more production capability than what is necessary to meet demand. When there is an excess capacity, resources may be underutilized, leading to inefficiencies and higher operational costs that do not correspond with revenue generation.

Additionally, having more capacity than necessary can result in price reductions to stimulate demand or to dispose of excess inventory. This can further erode profit margins, as the company may be forced to sell products at lower prices to move excess stock. Consequently, the mismatch between capacity and demand not only diminishes profit opportunities but also indicates a need for strategic adjustments in production and sales strategies to better align capacity with market conditions.