Capacity utilisation Flashcards
1
Q
What is capacity utilisation?
A
It is the percentage amount of a company’s maximum output being produced
2
Q
What is the problem with under capacity utilisation?
A
Higher unit costs as the same fixed costs are allocated over less units
Less efficiency
3
Q
What is the problem with operating too close to full capacity
A
Lack of flexibility so there is a sudden increase in orders the business will struggle to deal with it
4
Q
How to increase capacity utilisation?
A
Marketing (Price reduction, Promotions)
Rationalisation (Down size, Sell unused assets
5
Q
How to deal with high capacity utilisation?
A
- Outsource
- Reduce demand (increase price)
- Waiting lists
- Expand
6
Q
Definition of down size?
A
Reducing the size and number of employees
7
Q
What does Outsourcing mean?
A
Obtaining a good or service through another supplier
