2.4.2 CAPACITY UTILIZATION

Question 1

what is capacity utilisation

Answer 1

the use a business makes of its resources

Question 2

whats under utilisation

Answer 2

a position when a business is producing less than capacity

Question 3

whats over utilisation

Answer 3

a position when a business is running at full capacity straining resources

Question 4

how to improve capacity utilisation ?

Answer 4

1) increase demand through price cut or promotion
2) increase in off peak usage through promotion
3) reduce staff numbers
4) sell unused fixed assets
5) leave out spare capacity

Question 5

advantages of capacity under- utilisation

Answer 5

• allows a business to respond quickly to changes in demand
• may incur lower variable costs related to production
• can provide space for expansion and growth
• can focus on improving product quality and reducing defects
• can lead to reduced stress for employees

Question 6

disadvantages of capacity under - utilisation

Answer 6

• can lead to wasted resources and increased costs per unit
• lost revenue opportunities
• may signal inefficiency to stakeholders
• equipment and technology may become outdates if not used regularly

Question 7

advantages of capacity over - utilisation

Answer 7

• higher production levels, leading to maximising revenue
• can lower costs per unit, improving profit margins
• efficient use of resources
• gain a competitive edge in the market
• can lead to better returns on fixed assets

Question 8

disadvantages of capacity over - utilisation

Answer 8

• can lead to a decline in product quality
• can lead to a decrease in employee morale
• increased maintenance costs
• difficult to respond to sudden changes in demand

Question 9

what is outsourcing

Answer 9

when a business hires outside companies to handle certain tasks or services instead of doing them in-house