Theme 2 - 2.4.2 - Capacity Utilisation

Question 1

What is capacity utilisation ?

Answer 1

Capacity utilisation is the extent to which the maximum capacity for output that is being used – it is normally expressed as a % of maximum output e.g. 80%

Capacity utilisation is a measure of the extent to which the productive capacity of a business is being used.

Question 2

Whats capacity utilisation in detail ?

Answer 2

• In any business there are decisions to be made about how best to use resources

• An operations manager will need to make daily decisions about how best to turn inputs such as
machinery, labour and capital into outputs such as products and services

• Capacity utilisation is how best to use those resources for the benefit of the business

If a business can’t increase its output it’s at full capacity - therefore the machinery etc that they have can only produce a certain amount of products and this can’t be increased - for example a 100 person plane that is travelling in the air with 100 people would be at full capacity and if its carrying 50 people then it’s running at 50% capacity