2.4.2 capacity utilisation

Question 1

formula capacity utilisation

Answer 1

currant output/max possible output 100

Question 2

def capacity utilisation

Answer 2

extent to which max capacity is being used

Question 3

relationship unit/costs

Answer 3

high capacity utilisation = low unit costs –> fixed costs spread over more units (Economies of dcale)
low capacity utilisation = high unit costs –> fixed costs high per unit

measures efficiency –> comp advantage

Question 4

ideal capacity utilisation

Answer 4

90-95%

Question 5

if high break even output

Answer 5

high level of capacity due to significant costs of production

Question 6

reasons why businesses operate below full capacity

Answer 6

lower than expected demand
loss of market share
higher comp
sealpnal variations
recent increase in capacity
maintenance of machinery
allow ofr unexcpected demand
staff training
allows for downtimes

Question 7

how to imporve capacity utilisation

Answer 7

**increase demand ** : price cut, higher promotions
cut capacity: make staff redundant, sell machinery, lease capacity CP: QUal+time, move to smaller premises

Question 8

implications of under.utilisatoin

Answer 8

higher FC / unit
unmotivated staff –> lower productivity and qual
impact on brand image
lower profitability
inefficiency –> waste
may ned to rationalize
comp disadvantage –> comp efficient offer lower prices –> loss market share
cash flow problems

Question 9

options to increase decrease capacity

Answer 9

increase or decrease working hours
subcontroact production activites
recude increase time maintian and train
increase decrease amout assets
hire fixed or temp staff
shutdown or expand
reduction or increase in overtime

Question 10

Implications of Overutilisation

Answer 10

decline qual
staff burn out
increade breakdown risk
strain on resource –> not operate efficiently
staff work too much overtime so stress–> qual mistakes
less opportunity for staff training
limited flexibility ofr unexpected demand and growth