2.4.2 Capacity Utilisation

• What is the formula for calculating capacity utilisation?

  $Capacity Utilisation =$$\frac{Actual Output}{Maximum Output} \times 100\%$
• Being over ideal capacity can lead to increased operational costs and quality issues.
• Match the internal factors affecting capacity utilisation with their impact:

  Production processes ↔️ Direct impact on output

  Workforce efficiency ↔️ Output per worker

  Equipment maintenance ↔️ Minimises downtime

  Inventory management ↔️ Reduces stockouts and overstocking
• What is one positive impact of high capacity utilisation on a business?

  Increased profits
• Overworked staff may overlook errors, lowering product quality
• The ideal capacity utilisation range optimises efficiency without overburdening resources.
• Arrange the internal factors affecting capacity utilisation in order of their direct impact on output:

  1️⃣ Production processes

  2️⃣ Workforce efficiency

  3️⃣ Equipment maintenance

  4️⃣ Inventory management
• What is one external factor that can affect capacity utilisation?

  Market demand
• Consumer spending patterns are influenced by overall economic conditions
• Efficiencies in production are considered an internal
• Workforce efficiency affects output per worker.
• Proper inventory management reduces stockouts and overstocking
• What external factor drives production levels in a business?

  Market demand
• Technological advancements can increase production capacity.
• What is the term for the percentage of potential output that is actually produced?

  Capacity utilisation
• Internal and external factors directly or indirectly affect a business's ability to utilise its capacity efficiently
• What is one positive impact of high capacity utilisation on a business?

  Increased profits
• High capacity utilisation can lead to higher staff workload.
• Higher production levels in high capacity utilisation increase operational costs
• What is one negative impact of low capacity utilisation on a business?

  Reduced profitability
• Underutilised resources are a key issue in low capacity utilisation.
• Calculating capacity utilisation helps businesses identify and address issues to improve overall profitability
• What is one internal strategy to improve capacity utilisation?

  Reducing downtime
• Strategies to improve capacity utilisation in order of their primary focus:

  1️⃣ Increase production

  2️⃣ Reduce downtime

  3️⃣ Improve resource allocation
• What external strategy can businesses use to improve capacity utilisation?

  Market expansion
• Outsourcing is an external strategy to improve capacity utilisation.
• What is the formula for calculating capacity utilisation?

  \frac{\text{Actual Output}}{\text{Maximum Output}} \times 100\%</latex>
• The ideal range for capacity utilisation is typically between 80% and 90%
• If a factory produces 800 units out of a possible 1000, what is its capacity utilisation?

  80%
• Internal and external factors equally affect capacity utilisation.
• Higher workforce efficiency increases actual output
• What is one positive impact of high capacity utilisation on profits?

  More products sold
• Overworked staff can lead to potential quality issues in high capacity utilisation.
• What is one consequence of low capacity utilisation on resources?

  Underutilised resources
• Regular equipment maintenance helps reduce downtime