4.2) Operational Performance

Question 1

What is labour productivity?

Answer 1

Output per worker in a period.

Question 2

How is labour productivity calculated?

Answer 2

Units produced ÷ number of workers.

Question 3

Why increase labour productivity?

Answer 3

To improve competitiveness.

Question 4

What is unit cost?

Answer 4

Average cost per unit of output.

Question 5

How is unit cost calculated?

Answer 5

(Total fixed costs ÷ output) + variable cost per unit.

Question 6

Why do unit costs fall with higher output?

Answer 6

Fixed costs spread over more units.

Question 7

What determines capacity?

Answer 7

Buildings, equipment, workers, suppliers, finance and demand.

Question 8

What is capacity utilisation?

Answer 8

How much of maximum output is achieved.

Question 9

How is capacity utilisation calculated?

Answer 9

(Actual output ÷ maximum output) × 100.

Question 10

What is under-utilisation?

Answer 10

Low capacity use leading to high unit costs.

Question 11

What is an advantage of under-utilisation?

Answer 11

Flexibility for demand increases.

Question 12

What is over-utilisation?

Answer 12

High capacity use risking breakdowns and staff turnover.

Question 13

What is an advantage of high utilisation?

Answer 13

Lower unit costs and competitiveness.

Question 14

Give an example of capacity implication.

Answer 14

Low utilisation (55%) means higher unit costs than 80%.