Capacity Utilisation Flashcards

1
Q

Capacity utilisation

A

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

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2
Q

Capacity Utilisation Formula

A

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

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3
Q

Advantages of spare capacity

A

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

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4
Q

Problems with spare capacity

A

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

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5
Q

Ways of improving capacity utilisation

A

Increase sales
Increase usage

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6
Q

Over utilisation of capacity

A

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

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7
Q

Causes of low capacity

A

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

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