chapter 25 capacity utilisation and outsourcing

Question 1

capacity utilisation

Answer 1

the proportion of maximum output capacity currently being achieved

Question 2

outsourcing

Answer 2

using another business (third party) to undertake a part of the production process rather than doing it within the business using the firm’s own employees

Question 2

maximum (full) capacity

Answer 2

the highest level of sustained output that can be achieved

Question 2

rationalisation

Answer 2

reducing capacity by closing factories/production units

Question 2

business process outsourcing BPO

Answer 2

a form of outsourcing that uses specialist contractors to take responsibility for certain business functions, such as human resources and finance

Question 2

excess capacity

Answer 2

this exists when the current levels of output are less than the full-capacity output of a business; also known as spare capacity

Question 2

capacity shortage

Answer 2

when demand for a business’s products exceeds production capacity