Productivity & Capacity Utilisation

Question 1

Efficiency

Answer 1

How well resources such as labour, raw materials and capital are used to produce saleable items or services.

Question 2

Labour Productivity

Answer 2

Labour Productivity = Total Output
———————————-
Number of Employees

Question 3

Capital Productivity

Answer 3

Capital Productivity = Total Output
—————————
Capital Employed

Question 4

Increased Productivity

Answer 4

• motivation
• It would be easier/cheaper to TRAIN your employees or to recruit better skilled worker. You might train your employees and then they leave for your competitor so you’ll have to motivate them to stay which could be even more costly.
• Investment - in production equipment - impact on quality? Can workforce use it? Does the benefits outweigh the cost of investment?

Question 5

Capital Utilisation

Answer 5

CAPACITY is the maximum output that an organisation can produce in a time period given a quantity of assets.

• A measure of how effectively a firm utilising its capacity.
• Is the firm using its assets effectively?

Question 6

Capital Utilisation - calculation

Answer 6

Capital Utilisation = Actual Output per period
———————————————- X 100
Full Capacity Output per Period

Question 7

Impact on Cost

Answer 7

The higher the capacity utilisation, the lower the fixed cost per unit. Therefore the higher the profit margin. This is good because workers can be paid for their hard work. According to Maslow this may help to motivate the workers which may turn increase performance and therefore productivity.

Question 8

Impact on Cost

Answer 8

Staff can be motivated to work harder which would increase sales and productivity would increase.