Capacity Utilisation
- Created by: katieshrmn
- Created on: 11-03-15 14:32
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- Capacity Utilisation
- Capacity is the maximum output that a business can produce in a given period with the available resources
- A company producing at this level is working at full capacity
- Capacity Utilisation is the percentage of the total capacity that is actually being achieved in a given period
- A company large enough to produce 100 units a week but producing 92 units has a capacity Utilisation of 92% (92/100 x 100=92%)
- Spare capacity is the units or percentage that isn't being made out of the full capacity
- Producing 2,800 units when could be making 3, 500 units ... spare capacity of 700 units or 20%
- Why have spare Capacity???
- Lower market demand
- Increase in capacity (provides slack)
- New competitors
- Seasonal demand
- Help cope with unexpected problems
- Less stress on staff
- Negatives of spare capacity
- Higher proportion of fixed costs
- Increase selling price to maintain profit
- Portray a negative image
- Demoralising for workers
- Rationalis-ation is a process where a firm improves its efficiency by cutting the scale of its operations
- Selling off all or a part of its production area
- Shorter working week/day
- Redundant staff
- Transferring resources from another area
- Subcontacting is when an organisation asks another business to make all or a part of its product
- Stock control is the management of levels of raw materials, work in progress and finished goods in order to reduce storage costs while still meeting the demands of the customer
- High levels of stock...
- Demands promptly met
- No loss of good service
- Production lines are not halted because of shortages of raw materials
- Companies benefit from bulk buying and longer production runs
- Low stock levels...
- Reduced storage/ warehouse costs are possible
- Opportunity cost low
- Products less likely to become out of date/fashion
- Cash flow problems due to cash in stock is less likely
- High levels of stock...
- Non standard orders is a business decision relating to a one-off contract. Usually the non-standard order needs a response to a request to supply a fixed quantity of a product at a particular (lower than usual) price
- Agreed on the influence of...
- Effect on production
- Flexibility of capacity
- Impact on costs
- Potential for future (profitable) orders
- Effect on staff
- Agreed on the influence of...
- Capacity is the maximum output that a business can produce in a given period with the available resources
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