4.3 Capacity Utilisation and Outsourcing Quizs

Capacity

• measures the maximum amount of output a firm can produce at a given moment with its existing resources.

• is the total number of employees a firm can hire at any time.

• refers to the total sales a firm can achieve in a year.

• indicates the minimum production level required to break even.

Factors of production are inputs into the transformational process of business, such as:

• Land, labour, capital and enterprise

• Only land and labour

• Capital and enterprise only

• Natural resources and technology

Capacity utilisation

• measures the existing output relative to the maximum possible output.

• is the total output produced divided by the total input used.

• is the percentage of resources that are actually used compared to those that are available.

• is the measure of how efficiently a company uses its resources.

Outsourcing

• occurs when the business uses other producers to undertake some of its operations.

• is the process of hiring employees to work in-house.

• refers to the practice of reducing the workforce to cut costs.

• involves transferring ownership of a business to another company.

Rationalisation

• occurs when a business reduces the scale of its operations and reduces its capacity level.

• is a strategy to increase the workforce and expand production.

• involves increasing the number of products offered by a business.

• is the process of outsourcing business functions to third-party providers.

Subcontracting

• occurs when one business employs another business to undertake some of the work.

• is when a business operates independently without any partnerships.

• happens when a company outsources all its operations to a foreign country.

• is the process of hiring employees directly without any third-party involvement.

Capacity under-utilisation

• occurs when a business is producing less than the maximum amount it can produce, given its existing resources.

• when a business is producing at its maximum capacity without any waste.

• when a business is overproducing beyond its capacity limits.

• when a business is not utilizing its resources effectively.