2.4.2 capacity utilisation Flashcards
1
Q
capacity utilisation
A
measure of the percentage of the potential output being achieved
2
Q
capacity utilisation formula
A
current output/maximum possible output x 100
3
Q
capacity
A
the maximum amount of output achievable if all resources are fully utilised
4
Q
under utilisation
A
- increase in demand
- downsize to sell off assets
- lease off spare capacity
- high unit costs
5
Q
over utilisation
A
- firm is ‘sweating’ its assets
- low unit costs
- affect quality, stress to resources
- reduce demand
- outsource parts of business operation
- increase capacity by investing in resources
6
Q
importance of capacity
A
- ability to match supply with demand
- inverse relationship between capacity utilisation and unit costs
- image/public perception
- workforce motivation
- ability to achieve it’s business objectives
7
Q
how to utilise capacity efficiently - what does it depend on
A
- business objectives
- whether the issue is short term or long term
- ease with which options could be implemented
