Capacity Utilisation

Question 1

What is Capacity?

Answer 1

Amount of output a business is capable of producing.

Question 2

What is Full Capacity?

Answer 2

Point where a business cannot produce any more output.

Question 3

What is Capacity Utilisation?

Answer 3

Capacity utilisation is the amount of resources which is currently being used in a business, expressed as a percentage of full capacity i.e. maximum potential output.

Question 4

What is Over Utilisation?

Answer 4

A business is running at full capacity and ‘straining’ resources.

Question 5

What is Under Utilisation?

Answer 5

A business is producing at less than full capacity.

Question 6

What is Excess or Surplus Capacity?

Answer 6

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

Question 7

What is Mothballing?

Answer 7

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

Question 8

What is Rationalisation?

Answer 8

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