G 11 Capacity Utilisation

Which of the following statements about capacity utilisation is true?

• It measures workers' productivity

• It measures the productivity of machinery

• It measures current output compared with maximum output

• It measures the proportion of output that has been outsourced

When capacity utilisation increases

• average fixed costs decrease

• average fixed costs increase

• average variable costs decrease

• average variable costs increase

Which of the following situations is most likely to lead to rasionaliation?

• A short term increased in demand

• A long term increased in demand

• A short term decrease in demand

• A long term decrease in demand

Which of the following is an advantage of introducing greater flexibility?

• Flexible equipment might be expensive

• Staff may not like having flexible working contrasts

• Staff may need to be trained, adding to costs

• Production can be varied to meet demand

Which of the following is an advantage of working at full capacity?

• Staff may feel under pressure

• Machinery more likely to break down

• Lower average costs

• Difficult to cope with unexpected increase demand

Outsourcing is best used for:

• core activities of a business

• production

• non-core activities

• overtime work

Which of the following is not a benefit to a firm from outsourcing?

• Increased employment

• Increased flexibility

• Improved company focus

• Reduced overhead costs

Capacity utilisation goes up, thereforeunit cost will...

• Stay the same

• Decrease

• Increase

• Up and down

Which one is NOT the benefit of high utilization

• Average cost down

• Sign of success

• Employees get senses of security

• Staff under pressure

When the demand for a business's products exceeds production capacity is created

• Capacity shortage

• Excess capacity

• Full capacity

• Rationalization