Capacity
- Created by: Charlotte
- Created on: 31-10-18 18:37
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- Capacity
- Capacity Definition
- A measure of how much output it can achieve in a given period.
- In exams give what this period is e.g. per day, month, week, year etc.
- A measure of how much output it can achieve in a given period.
- Capacity Utilisation
- The percentage of a business' capacity that is actually being used over a specific period.
- Expressed as a percentage.
- Actual level of output / maximum possible output X100
- Why capacity utilisation matters
- It is a useful measure of productive efficiency since it measures whether there are idle (unused) resources in the business.
- Businesses usually aim to produce as close to full capacity (100% utilisation) as possible in order to minimise unit costs.
- Capacity is a dynamic concept
- Capacity can change.
- Capacity is linked to labour
- e.g. by working more production shifts, capacity can be increased.
- Capacity needs to take account of seasonal or unexpected changes in demand e.g. doctors or Garsons.
- The costs of capacity
- Equipment e.g. production line
- Facilities e.g. building rent, insurance.
- Can a business operate at more than 100% capacity?
- Can be possible in the short term
- Increase workforce hours
- Extra shifts; encourage overtime; temporary staff.
- Sub-contract some production activities
- Some problems of doing this could include ethics-morals could not be the same, out of your control-quality, time-might not be completed in your specifies time limit. Consequently, brand issue could suffer.
- E.g. assembly components
- Reduce time spent maintaining production equipment.
- Problems working at High Capacity
- Negative effect on quality (possibly)
- Production is rushed.
- Less time for quality control- less time for making sure the product is perfect.
- Loss of Sales
- Less able to meet sudden or unexpected increases in demand.
- Negative effect on quality (possibly)
- Capacity Definition
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