2.2.3 Capacity Utilisation Flashcards
1
Q
What is capacity utilisation?
A
Making the maximum usage
2
Q
Capacity utilisation is an important concept:
A
- It is often used as a measure of productive efficiency
- Average production costs tend to fall as output rises
- So firms usually aim to produce as close to full capacity as possible
3
Q
Working at 100% capacity benefits
A
- Large amounts of products are made quickly
4
Q
Working at 100% capacity drawbacks
A
- Costly
- Lack of quality
- Overtime maintenance
- Average cost per item goes down
- Machines may breakdown: orders will be delayed
- Staff may feel under pressure: more mistakes
- Factory space overcrowded
5
Q
When is a business likely to be working at 100% (or above) capacity?
A
A chocolate factory eg. cadburys would be working at full capacity during easter time when making easter eggs
6
Q
How can a business operate above capacity?
A
- Increase workforce hours
- Reduce time spent maintaining production equipment
