Key Terms - Capacity Utilisation

Question 1

Capacity utilisation

Answer 1

The use that a business makes of its resources

Question 2

Excess or surplus capacity

Answer 2

When a business has too many resources, such as labour or capital, to produce its desired level of output

Question 3

Full capacity

Answer 3

The point where a business can not produce any more output

Question 4

Mothballing

Answer 4

Leaving machines, equipment or building space unused, but maintained, so they can be brought back into use if necessary

Question 5

Over-utilisation

Answer 5

The position where a business is running at full capacity and ‘straining’ resources

Question 6

Rationalisation

Answer 6

Reducing the number of resources, particularly labour and capital, put into the production process, usually undertaken because a business has excess capacity

Question 7

Under-utilisation

Answer 7

The position where a business is producing at less then full capacity