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Business AS CIE

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  1. enterprise as
    6 主题
  2. business-structure as
    6 主题
  3. size-of-business as
    3 主题
  4. business-objectives as
    3 主题
  5. stakeholders-in-a-business as
    2 主题
  6. human-resource-management as
    8 主题
  7. motivation as
    4 主题
  8. management as
    2 主题
  9. the-nature-of-marketing as
    7 主题
  10. market-research as
    3 主题
  11. the-marketing-mix as
    6 主题
  12. the-nature-of-operations as
    3 主题
  13. inventory-management as
    2 主题
  14. capacity-utilisation-and-outsourcing as
    1 主题
  15. business-finance as
    2 主题
  16. sources-of-finance as
    3 主题
  17. forecasting-and-managing-cash-flows as
    1 主题
  18. costs as
    4 主题
  19. budgets as
    1 主题
  1. Business AS CIE
  2. capacity-utilisation-and-outsourcing as
  3. capacity-utilisation-and-outsourcing capacity-utilisation-and-outsourcing
课 14, 主题 1
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capacity-utilisation-and-outsourcing capacity-utilisation-and-outsourcing

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Exam code:9609

Measuring capacity utilisation

  • Capacity utilisation measures how effectively a business uses its assets to produce output

    • It compares current output to the maximum possible output a business can produce using all of its assets

  • Capacity utilisation is calculated using the following formula and expressed as a percentage

Capacity space utilisation space equals space fraction numerator space space Current space output over denominator Maximum space possible space output end fraction space cross times space 100

Worked Example

Bäkkerei Lola produces specialist Indian and Bangladeshi breads, which are sold to restaurants in the Munich area

Batch production is used in the factory to manufacture the range of breads and the factory can produce a maximum of 68,400 units per month

In May factory output was 51,420 units

Calculate Bäkkerei Lola’s capacity utilisation in May. 

(2)

Step 1: Divide the current output by the maximum output

equals space fraction numerator 51 comma 420 space units over denominator 68 comma 400 space units end fraction space space space space space space equals space space 0.75 space space(1 mark)

Step 2: Multiple the outcome by 100 to obtain the percentage capacity utilisation

equals space 0.75 space straight x space 100 equals space 75 percent sign (1 mark)

Examiner Tips and Tricks

In your exam, you may need to rearrange the capacity utilisation formula. You may be given the percentage of capacity utilisation and have to calculate the volume of output.

The impact of under-capacity utilisation

  • Low capacity utilisation means resources are being underused

    • This may lead to inefficiencies and lost potential output

Positive and negative impacts of undercapacity utilisation

Positive impacts

Negative impacts

  • The business is not working at full stretch, so it can easily increase production if needed or take on unexpected orders

  • Spare time can be used for important jobs like checking and fixing machinery, helping to prevent breakdowns in the future

  • Unit costs are likely to be higher because fixed costs are spread over fewer units of output

  • Workers are under-deployed, leading to fears of redundancy

  • If staff are not fully occupied, they may worry about losing their jobs, which can affect morale and motivation

Improving capacity utilisation

  • High capacity utilisation means a business is making the most of its resources, such as staff, machines, and buildings

    • This helps to lower unit costs, improve efficiency, and increase profits

Ways to increase capacity utilisation

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