2.4.2 capacity utilization Flashcards

1
Q

what is capacity utilization

A

is about the use that a business makes of its resources

- linked to productivity and efficiency

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2
Q

how do you calculate capacity utilization

A

existing output
———————— x100
maximum possible output

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3
Q

what are some benefits and limitation of performing below capacity utilization?

A

Idle resources costing money but not being used
unit costs rise
opportunity to increase capacity utilization by taking on new order

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4
Q

what are some problems with over capacity utilization

A
  • employees become overworked
  • mistakes more likely
  • unit costs rise die to the above
  • opportunity for growth
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5
Q

how would a business increase capacity

A
  • sub contract out production to another business
  • offer overtime pay to workforce
  • employ workers on a temporary contractors
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