2.4.2 - Capacity Utilisation

Question 1

What is capacity utilisation?

Answer 1

Percentage of a business’ capacity that is being used

Question 2

Capacity Utilisation formula

Answer 2

Current output / maximum possible output x 100

Question 3

5 ways to improve capacity utilisation

Answer 3

1. Reduce capacity
2. Increase usage
   - Promotions when demand is low
   - Discounts on certain days
3. Outsourcing
   4.Redeployment
   - Work in another department needed
4. Increase sales

Question 4

Implications of under-utilisation

Answer 4

1. Increased unit costs
   - Not making most of the resources
2. Flexibility

Question 5

Implications of over-utilisation

Answer 5

1. May not have flexibility
   - Under-pressured staff
   - Machinery can be broken disrupting production
2. Minimise average costs
3. Increase business competitiveness
   - Workers willing to work as they feel secure if busy
   - If busy will attract consumers