2.4.2 Capacity Utilisation

Question 1

What is capacity utilisation?

Answer 1

The use a business makes of its resources.

Current output/ max possible ouput x 100

Question 2

What are the pros and cons of under-utilisation?

Answer 2

Pros:
- Can cope with sudden increases in demand.
- Less stress/ workload.

Cons:
- Unable to minimise unit costs due to no EOS.
- Workers may not be able to handle a sudden increase in demand.

Question 3

What are the pros and cons of over-utilisation?

Answer 3

Pros:
- Average costs are lower.
- Higher job security for workers which will be motivating.

Cons:
- Not able to respond to changes in demand.
- High stress for workers.

Question 4

How to improve capacity utilisation?

Answer 4

• Reduce capacity to save money.
• increasing sales.