Capacity Utilization

Fill in the blank: Capacity utilization measures what percentage of a firm’s potential output is actually being ________.

• achieved

• lost

• ignored

• wasted

Capacity utilisation is a measure of what?

• The maximum output a company can produce

• The percentage of potential output that is actually being achieved

• The total revenue generated by a company

• The number of employees in a company

Which of the following is a benefit of high utilization?

• A) Staff under pressure

• B) No flexibility for new orders

• C) Average costs down

• D) Insufficient time for machine maintenance

What is excess capacity?

• The amount of production that exceeds the demand

• The amount of production that is below the demand

• The optimal level of production

• The level of production that matches the demand

Which of the following is a reason for excess capacity?

• Increased demand

• Improved technology

• Decreased efficiency

• Constant product demand

List two strategies mentioned for introducing flexibility in managing excess capacity.

• Implementing flexible work schedules and cross-training employees

• Increasing production hours and hiring temporary staff

• Investing in new technology and outsourcing

• Reducing workforce and cutting costs

A business is operating at full capacity when:

• it is producing goods at maximum efficiency without any waste.

• it has more resources than needed.

• it is operating below its potential output.

• it is producing goods with excess resources.

Define Outsourcing

• using another business (a ‘third party’) to undertake a part of production process rather than doing it within the business using the firm’s own employees.

• hiring more employees within the company to increase production.

• expanding the business to new locations to increase market share.

• investing in new technology to improve production efficiency.

Define Business Process Outsourcing (BPO):

• a form of outsourcing that uses a third party to take responsibility for certain business function such as HR and finance.

• a method of internal process optimization within a company.

• a strategy for increasing in-house production capabilities.

• a type of marketing strategy focused on customer engagement.

Define Core activity: activity or activities within a business which are central to the businesses aims and objectives.

• Core activity: activity or activities within a business which are central to the businesses aims and objectives.

• Core activity: activities that are optional and not related to the business's main goals.

• Core activity: activities that are external to the business's operations.

• Core activity: activities that are temporary and not essential to the business.