Capacity Utilisation

HideShow resource information
What is Capacity?
A measure of how much output it can achieve in a given period.
1 of 10
How can capacity change?
A machine could be having maintenance, by working more production shifts. Season or unexpected changes
2 of 10
What is Capacity Utilisation?
The proportion (%) of a business' capacity that is being used over a specific period.
3 of 10
What is the formula for capacity utilisation?
(Actual Level of Output / Maximum Possible Output) x 100
4 of 10
Why is Capacity Utilisation important?
Useful measure of productive efficiency since it measures whether there are idle resources in a business. Average production costs tend to fall as output rises. Businesses usually aim to produce as close to full capacity as possible. to break-even
5 of 10
What are they key costs of capacity?
Equipment e.g. production line. Facilities e.g. building, rent, insurance. Labour: wages and salaries
6 of 10
Why do businesses operate below full capacity?
Lower demand than expected, A loss of market share, Seasonal variations in demand, Recent increase in capacity, Maintenance and repair programmes.
7 of 10
What are the dangers of operating at low capacity utilisation?
Higher unit costs - impact on competitiveness. Less likely to reach breakeven output. Capital tired up in under-utilised assets
8 of 10
How can a business work above full capacity utilisation (100%)
Increase workforce hours, Sub-contract some production activities, Reduce time spent maintaining production equipment - ALL SHORT TERM.
9 of 10
What are problems of working at a high capacity?
Possibily a negative effect on quality, Employees may suffer and a loss of sales
10 of 10

Other cards in this set

Card 2

Front

How can capacity change?

Back

A machine could be having maintenance, by working more production shifts. Season or unexpected changes

Card 3

Front

What is Capacity Utilisation?

Back

Preview of the front of card 3

Card 4

Front

What is the formula for capacity utilisation?

Back

Preview of the front of card 4

Card 5

Front

Why is Capacity Utilisation important?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Business resources:

See all Business resources »See all Capacity Utilisation resources »