Capacity , utilisation and management

Question 1

What is capacity utilisation ?

Answer 1

Using the resources that the business has in the most efficient way

Question 2

What is capacity management ?

Answer 2

Using the resources of the business such as factory space , machinery , labour

Question 3

How do you calculate capacity ?

Answer 3

Actual current level of output / maximum capacity X100

Question 4

How can businesses reach full capacity ?

Answer 4

Increase the demand for products produced

Produce different products with additional stock

reduce capacity / moth balling ( capacity taken out during a recession

Question 5

What are the limitations of reaching full capacity ? `

Answer 5

If they are seasonal , cost of maintaining is costly
outsourcing will reduce utilisation capacity
Better alternatives will reduce demand for your product

Question 6

What are the benefits of working at full capacity ?

Answer 6

Lowers unit costs
Less wastage
Profits increase
More competitive due to lower costs
Employee bonuses / motivation

Question 7

What are the negatives of working at full capacity ?

Answer 7

Little to no time for maintenance
Less time on training available
Quality may be effected
Cannot meet new orders / causes backlog and costs will rise