Capacity Utilisation 2.4.2
Maximum capacity - the maximum amount of output achievable if all resources are fully utilised. Capacity Utilisation - measures what proportion or percentage of the theoretical maximum possible outcome is actually produced. Under - utilization of capacity - means that some resources are not being used and production is not as high as it could be Over - Utilisation - means that the business is trying to produce more than its capital equipment was design for Unit costs - TOTAL COSTS (FC + VC) / CURRENT OUTPUT Within an individual business, capacity utilisation shows how much of the company's resources are actually in use. If all available resources, all labour, machinery and space are in use at any one time, the business cannot produce any more output and is said to be at 100% capacity utilisation. In the long run capacity CAN BE INCREASED by acquiring more resources e.g. bigger premises, more machinery, introducing a 3rd shift In the long run capacity CAN BE REDUCED...