Capacity Utilisation (Edexcel A-Level Business): Flashcards
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Capacity utilisation definition
Capacity utilisation definition
Measures how effectively a business uses available resources
Full capacity percentage
Full capacity percentage
Capacity utilisation reaches 100%
Capacity utilisation formula
Capacity utilisation formula
(Current output / Max possible output) × 100
Why under-utilisation increases unit costs
Why under-utilisation increases unit costs
Fixed costs spread across fewer units of output
Over-utilisation definition
Over-utilisation definition
Running at or above 100% capacity, stretching resources
Rationalisation
Rationalisation
Cutting excess capacity by eliminating unnecessary resources
Outsourcing
Outsourcing
Hiring external businesses to perform work done in-house
Mothballing
Mothballing
Leaving equipment unused but maintained for future use
Redeployment
Redeployment
Moving resources from excess capacity areas to constrained areas
Main benefit of spare capacity
Main benefit of spare capacity
Flexibility to respond to sudden demand increases