Capacity Utilisation & Quality Flashcards
Name three factors capacity can depend on
Number of employees, amount of machinery, employees skills.
Define capacity
Capacity is the maximum output a business can produce with the resources available.
Define capacity utilisation with its formula
Capacity utilisation is how much capacity a business is using. Capacity Utilisation (%) = Output / capacity X 100
What are three drawbacks of working at 100% capacity?
Lower quality, no downtime for machinery or employees have to turn away potential customers.
Name three ways a business can increase its capacity
Open more, have more machinery, increase staff, increase productivity (motivation)
Define under utilisation
Under utilisation is where a business is not working at 100% capacity
Why is under utilisation inefficient and how does it increase unit costs
It’s inefficient as a business is not getting full use out of its machinery and facilities. It increases costs as fixed costs will be spread out over a smaller output, contribution.
What should firms with a low demand do if all attempts to increase demand fail?
Reduce capacity
Name three ways a business can reduce capacity
Selling off factories, selling of machinery/equipment, reducing overtime, making staff redundant.
Define Quality
Good quality means meeting the wants and needs of the customer, the item is also fit for purpose.
How does having good quality effect a business?
It reduces costs and increases revenue
Name three ways having good quality reduces costs
Less raw materials used up by mistakes, don’t need as much promotion to advertise to shops/customers, fewer customer care staff are needed, fewer refunds, fewer claims on warranties.
Name three ways good quality increases revenue
You can charge a premium price, quality can be your USP, can improve the businesses brand image and reputation, it keeps old and brings in new customers.
Why is self checking for quality better than hiring a quality control inspector?
It is more motivating to staff, no additional staff need to be hired.
Define Total Quality Management
Total quality management means the whole workforce has to be committed to quality improvement.
