Capacity Utilisation And Management

Question 1

Capacity utilisation

Answer 1

The % of total capacity that is actually being achieved in a given period
- the actual amount of resources being used or produced

Question 2

Capacity management

Answer 2

Concerned with the uses of resources of a business
Includes:
- analysis of performance and the effect o capacity of intro new products
- performance fine tuning in attempt to gain most effective and efficient usage of the capacity
- capacity planning to aid the dev of a strategy
- monitoring the capacity of the IT server within a business

Question 3

Increased capacity utilisation : unit costs fall

Question 4

Formula for capacity utilisation

Answer 4

(actual or current level of output / maximum possible output) x100

Question 5

Ways of reaching full capacity

Answer 5

1) increase the demand for products produced —> marketing dept. campaigns to inc demand
2) produce different additional products with the same resources —> i flexible produce other goods to inc output
3) reduce capacity —> mothballing - capacity kept but taken out of usage so wrapped up and stored for economic upturn. OR productive capacity acc reduced

Question 6

Constraints on reaching full capacity

Answer 6

1) level of comp in market in relation to size of market: if many comps competing for limited no of consumers - less likely full capacity reached
2) stage of the product life cycle: if demand declining op at full capacity less likely
3) i product seasonal - will be fluctuations in demand and capacity utilisation
4) new superior products entered market —> reduce demand and level of production
5) inc capacity will reduce ability to reach full capacity
6) outsourcing will reduce capacity utilisation

Question 7

Benefits of operating at full capacity

Answer 7

• as CU inc, av unit costs will fall as will be spread across more sales
• fixed costs spread over more goods and vc’s may benefit from eos like bulk buying
• less waste of resources
• profits inc bc of reduced unit costs
• inc competitiveness bc of reduced prices —> aid survival
• employees busy —> more motivated —> inc quality

Question 8

Disadvantages of op at full capacity

Answer 8

• little opp for maintenance of machines - breakdowns more likley
• any additional order will be impossible or require signif costs in overtime
• put pressure on employees - stressed —> absenteeism
• little time for in house training
• level of quality may be aff

Question 9

Over-utilisation of capacity

Answer 9

Only a ST factor which is where resources pushed beyond normal levels. Extra working hours or subcontracting