capacity utilization

Lean production is best defined as:

• a system of frequent improvement
• a production method that aims to reduce all forms of waste
• a production method dependent on automation
• a production method in which zero inventories are held
  by the firm

Capacity utilisation is defined as:

• the proportion of maximum potential output currently being produced
• full-capacity output
• maximum output ÷ current output × 100
• the level of output that is in balance with demand

If a firm is operating at 70% of its capacity, which one of the following statements
is true?

• Fixed costs are currently lower than they would be at full capacity.
• There is excess capacity.
• The firm would have to take on more workers to increase production.
• The firm is making a profit.

As a firm increases its capacity utilisation from 50% to 60%, then, other things
being equal, average fixed costs will:

• remain unchanged
• increase by 20%
• fall
• become zero

A firm that is faced with the problem of long-term excess capacity is most likely
to benefit from which one of the following strategies?

• rationalisation
• increasing production and adding to inventories
• reducing employee holidays so that more can be produced
• reducing promotional expenditure

When the demand for a business's products exceeds production capacity it is called:

• Spare capacity
• Capacity shortage
• Outsourcing
• Full capacity

Short-term capacity planning deals with which of the following factors?

• Overtime budgets

• Workforce Size

• Inventories

• All of the above

Operation at peak capacity involves:

• Sustained low utilisation rates

• Marginal methods of production

• Maximum output under normal conditions

• None of the above

Larger capacity cushions, to buffer against uncertainty in demand, may be avoided by:

• High levels of skill specialisation in the workforce

• High levels of inventory

• High levels of production quality

• High levels of labour turnover

A possible disadvantage of operating at very high levels of capacity utilisation is:

• Labour productivity is low

• Less able to respond to sudden increases in demand

• Break-even output will be higher

• Cannot invest in new technology