AS Business Studies 9609
Business Studies – 4.3 Capacity Utilisation
- Significance and measurement of capacity utilisation
- Impact of operating over maximum or under capacity
- Methods of improving capacity utilisation
- The impact of outsourcing on a business
Capacity Utilisation
Capacity utilisation is the extent to which the maximum output capacity is being used by a business. Capacity utilisation is usually expressed in a %. It’s important for a business to manage capacity utilisation because being under capacity (0-70%) leads to wasting resources as the business is not utilising its resources. Being over capacity (95-100%+) also presents problems for a business as it is unable to operate or provide a service. When a business is near or over capacity a potential solution could be to outsource operations.
Thinking about Capacity Utilisation
It’s important to understand that the ideal Capacity Utilisation will depend on the business and its objectives. It’s not feasible for an airliner to fly planes at only 40% capacity as the cost of fuel and employee salaries may not be covered. Flying planes at 90% or even 100% Capacity will mean larger profits for the business. However, if the flight is overbooked the airliner could face other problems.
Calculating Capacity Utilisation
Current Output / Maximum Output x 100
Or depending on the business.
Current Bookings / Maximum Bookings X 100
Definition
Section A 4.3 Capacity Utilisation Practice for Paper One
Section B 4.3 Capacity Utilisation Practice for Paper One
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