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business studies theme 2 - topic 2 (problems of over-utilisation of…
business studies theme 2 - topic 2
capacity
- the amount of stock that a business holds and is able to hold. the lower the stock level, negative implications may arise. however, correct management of stock - profit maximisation
capacity utilisation
- measures how effectively a firm is using it's capacity as a percentage (actual output/maximum possible output)
under-utilisation of capacity
- (or spare capacity) is where a firms output is below the maximum possible output
disadvantage of spare capacity
- paying staff to do nothing, a firms fixed costs are spread after a smaller number of units (products) therefore you have a higher unit cost.
potential low motivation
negative reputation
advantages of spare capacity
easier to expand, spare capacity means a faster response
free time - training maintenance
less pressure on staff could increase quality of work rates and efficiency
capacity shortage
- is where there is not enough capacity to fulfil customer demands
problems of over-utilisation of capacity
overtime costs
mistakes made in production
inability to maintain, repair and clean equipment
inability to accept new customer orders
adjusting demand, increasing demand
price
product
place
promotion
rationalisation
- is a process of improving efficiency by cutting back on the scale of operation
lay staff off
sell of parts from machines in production process
move to a smaller premesis