Capacity Utilisation

Question 1

Capacity utilisation

Answer 1

The % of the firms total possible production capacity that is actually being used

Question 2

Capacity Utilisation Formula

Answer 2

Capacity Utilisation= (Current output/maximum possible output) x100

Question 3

Advantages of spare capacity

Answer 3

Less stress on workers
Firm can cope with new ideas
Better customer experience EG; gyms or planes
More time for maintenance and repairs

Question 4

Problems with spare capacity

Answer 4

Higher fixed costs per unit
Staff become bored/ demoralised
Can portray negative business image

Question 5

Ways of improving capacity utilisation

Answer 5

Increase sales
Increase usage

Question 6

Over utilisation of capacity

Answer 6

Too much pressure for workers which can make them less efficient
Cause stress and fatigue
Business may not know how to respond to increased demand

Question 7

Causes of low capacity

Answer 7

New competitors may take over the market
Unsuccessful marketing
Fall in demand
Seasonal demands
External shocks