Capacity utilisation

Question 1

Capacity utilisation

Answer 1

the proportion of maximum output capacity currently being achieved.

= current output level * 100 / maximum output level

Question 2

Excess capacity

Answer 2

exists when the current levels of demand are less than the full capacity output of a business – also known as spare capacity.

Question 3

Rationalisation

Answer 3

reducing capacity by cutting overheads to increase efficiency of operations, such as closing a factory or office department, often involving redundancies.

Question 4

Full capacity

Answer 4

when a business produces at maximum output.

Question 5

Capacity shortage

Answer 5

when the demand for a business’s products exceeds production capacity.

Question 6

Outsourcing

Answer 6

using another business (a ‘third party’) to undertake a part of the production process rather than doing it within the business using the firm’s own employees.

Question 7

Business-process outsourcing (BPO)

Answer 7

a form of outsourcing that uses a third party to take responsibility for certain business functions, such as HR and finance.