2.4.2 Capacity utilisation Flashcards
1
Q
define capacity utilisation
A
extent to which the maximum capacity for output that is being used
2
Q
what is it normally expected in
A
No. % of max output
3
Q
what daily decisions must be made
A
how to turn inputs into outputs
4
Q
why must resources be used for the benefit of the business
A
it has bearing on average costs per unit (eos)
5
Q
define high capacity utilisation
A
fixed costs spread over more units of production
6
Q
define low capacity utilisation
A
fixed costs are too high to stay in business or keep producing
7
Q
ways of improving capacity utilisation
A
- price cost
- promotion
- increase wage during off peak times
- loyalty cards
- special deals
- make redundant staff or machinery
8
Q
capacity utilisation formula
A
current output divided by max output x 100
9
Q
implications of under utilisation
A
- higher FC per unit
- unmotivated staff
- impact on brand image
- businesses may need to rationalise
- redundancy
- increases flexibility
- able to accept non standards orders
- time to train staff
- time to maintain machinery
10
Q
implications of over-utilisation
A
- damage brand reputation
- no time to train staff
- quality suffers
