I recently entered a value for capacity in a project tracking tool. My understanding is that this number represents the amount time available for project work for a given period. The simple way to calculate this is number is to multiply the number of developers by the number hours available to work in a given time period. But, as anyone that has been on a software/IT project will know, not everyone:
1. Has the same role on project so not everyone can work on the same thing. This means work is not interchangeable and thus can not be easily be divided by the number of people on the team.
2. Works at the same rate.
3. Can start at the same time or work continually at a steady rate throughout the project.
Rough numbers are great for getting a picture of how much time you have for a project but bear in mind their limitations in the real world.