Chapter 66, Capacity utilisation and management

Question 1

Capacity Utilisation

Answer 1

using the resources of the business in an effective and efficient manner

Question 2

Constraints on reaching full capacity

Answer 2

• level of competition within the market
• stages of the product lifecycle
• if the product is seasonal

Question 3

Benefits of operating at full capacity

Answer 3

• the average unit cost falls
• fixed costs are spread over more goods, benefiting from economies of scale
• less wastage of resources
• profits increase
• busy employees
• more competitive

Question 4

Disadvantages of operating at full capacity

Answer 4

• no opportunity for maintenance

- any additional orders are impossible