2.4.2 Capacity utilisation

Question 1

What is the formula for capacity utilisation

Answer 1

• Current output/Maximum Output x 100

Question 2

What is the implication of under utilisation

Answer 2

• Because fixed costs are spread across fewer units of output
• Reduced workforce moral

Question 3

What is the implications of over utilisation

Answer 3

• Business may struggle to maintain or service machinery
• May need to turn away demand, giving business to competitors

Question 4

What are some way of improving capacity utilisation

Answer 4

• Increase demand via marketing
• Reduce overall capacity

Question 5

What are some ways of addressing over capacity utilisation

Answer 5

• Investment in increased capacity
• Subcontracting