In order to build a new factory, we must have answers regarding the following questions; 1. what is to be produced? 2. how are the products to be produced? 3. how much of each product will be produced? The answers are related to product-design, process-design and capacity-design respectively and they are used for layout-design as the input data. Especially capacity design decision provides the information regarding the number of equipments required and the balance of the line. This paper introduces a case study on the capacity design for a new factory where the retainers of ball bearing are manufactured. A simulation model is developed with ARENA for analyzing the system considered. The major objectives of the study are evaluating the performance of the line which is originally suggested by the company, and finding out alternatives for improving the system. Number of WIP between the processes are also investigated because it affects the space planning of the layout.