Practise calculating capacity utilisation from output and maximum capacity and analysing how operating below or above capacity affects efficiency, quality, cost and customer…
Analyse one possible impact on a business of operating over maximum capacity.
Analyse one possible impact on a business of operating over maximum capacity.
Indicative content
Responses may include:
AO1 Knowledge and understanding
1 mark for identifying one possible impact of operating at over maximum capacity
- Stress on employees
- Impact quality
- Business inflexibility
- Unable to maintain machinery
- Strain on business resources - inventory
- Sell more
- Economies of scale
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AO2 Application
2 marks for a developed explanation of one possible impact of operating at over maximum capacity
1 mark for limited explanation of one possible impact of operating at over maximum capacity
- The impact could affect staff - who are likely to be put under excessive stress.
- Could impact on quality - if staff rush work and make mistakes/increase waste
- Business becomes inflexible - as has no room to increase output for new orders/opportunity cost of not responding to new product demand.
- Might not be able to maintain machinery - which could break down.
- Can put a strain on business resources - staff may need extra training
- More products produced and available to sell
- Costs fall due to increased output
AO3 Analysis
2 marks for developed analysis of one possible impact of operating at over maximum capacity
1 mark - for limited analysis of one possible impact of operating at over maximum capacity
- Overworked staff could make more mistakes - a reduction in quality could impact brand image and lost sales.
- Could lead to high absenteeism and high staff turnover - increase recruitment costs - don't have enough staff to meet orders.
- May have to increase amount of overtime to meet orders - raise business costs.
- If operating over maximum capacity then new orders might not be possible - lose potential customers and sales.
- If demand reduces stock will remain unsold therefore wastage/opportunity cost
- If machines break down due to lack of maintenance - production stops - lose or delay orders - gives a bad reputation for being unreliable.
- Average costs can rise - due to falling levels of efficiency such as machines breaking down.
Accept all valid responses.