2.4.2 capacity utilisation Flashcards
1
Q
define capacity utilisation?
A
the use that a business makes if its resources
2
Q
what is excess or surplus capacity?
A
when a business has too many resources, such as labour and capital than its desired level of output
3
Q
what is over-capacity utilisation?
A
when a business is running at full capacity
4
Q
what is under-capacity utilisation?
A
the position where a business is producing at less than full capacity
5
Q
what are the complications of working under-capacity?
A
- unit costs rise
- unmotivated staff - no work to do
- can ruin brand image
- business may need to rationalise
+ opportunities for growth
6
Q
what are the implications of working over-capacity?
A
- employees are overworked and unhappy
- mistakes are more likely
- unit costs rise
- can damage brand image
+ opportunities for growth
7
Q
how do you calculate capacity utilisation?
A
current output
_____________ x 100
maximum output
8
Q
how do you improve capacity utilisation?
A
- increase demand through price cut and promotion
- staff redundancies
- sell off assets
- could lease out capacity to other businesses
9
Q
how do you decrease capacity utilisation?
A
- rationalisation
- subcontract in work from other businesses
