Capacity Utilisation

Question 1

Capacity utilization equation

Answer 1

Current output/Max possible output x100

Question 2

Capacity utilization

Answer 2

Measure the level to which a business assets are being used to produce output

Question 3

Underutilization

Answer 3

+Provides business with flexibility, so can respond to sudden increases in demand

-Increased unit cost
-under-deployed employees leading to fears of redundancy

Question 4

Overutilization

Answer 4

+Minimise average total costs
+Busy workers feel secure in their employment

-No flexibility to respond to new orders
-Staff under pressure/overworked
-Machines pushed, and prone to breakdowns