Capacity Utilisation 0.0 / 5 ? Business StudiesOperations managementASAll boards Created by: hamishcCreated on: 13-04-16 20:22 What is capacity? Maximum output with available recources 1 of 8 Formula for capacity utilisation output / capacity x100 2 of 8 3 disadvantages of 100% utilisation Output can be greater than demand, business may have to turn away customers, business cant temporarily output for one off orders 3 of 8 3 ways a business can increase capacity Use of facilities for more than working week, business can buy more facilities, outsource manufacturing 4 of 8 Disadvantage in under utilisation Causes fixed costs to be spread over fewer units of output, so unit costs increase 5 of 8 The 2 ways firms deal with under-utilisation? First increase demand, or reduce capacity. 6 of 8 2 ways firms can increase demand Change marketing mix, subcontract competitors work 7 of 8 Way firms reduce capacity Closing production facilities 8 of 8
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