Capacity utilisation
- Created by: noe
- Created on: 21-03-20 15:08
View mindmap
- CAPACITY UTILISATION
- The use a business makes of its resources
- Full capacity- the point where the business cannot produce more output
- Excess/surplus capacity- when a business has too many resources to produce its desired level of output
- Capacity utilisation = current output/ maximum possible output *100
- Under-utilisation
- A business that is producing at less than full capacity
- Drawbacks
- The business may be operating inefficiently as its unit costs are not minimised
- It might make workers feel insecure in their jobs as they may feel the business is struggling to generate orders.
- Workers may become accustomed to a 'light' workload and may dislike working hard if the business gets more orders.
- Benefits
- A business will be able to cope more easily with a sudden increase in demand so customers won't be lost to rivals.
- Less work-related stress for both workers and managers, reducing sickness and rates of staff absence.
- Over-utilisation
- A business that is running at full capacity and putting strain on resources
- Benefits
- Lowe average costs because fixed costs will be spread across more units of output - improves competitiveness and raises profits
- Workers will feel secure at their jobs and they may be happier if there are opportunities to increase their earnings by doing overtime
- A busy operation can improve the company's image, increasing the confidence in customers.
- Drawbacks
- It causes stress and tiredness on the workforce, increasing the risk of accidents or absence
- Machines more likely to breakdown resulting in high costs and losses for the business
- A business may not be able to respond to an increase in demand, losing orders from customers
- There may be insufficient time for staff training and importance maintainance work
- The use a business makes of its resources
Comments
No comments have yet been made