Practise calculating and evaluating productivity, capacity utilization and the effects of operating near full capacity for IB Business Management HL.
Sassy
Sassy, a partnership between fashion designers, produces clothes for teenagers. Capacity utilization is very high.
The partners are considering some strategic changes. After conducting research, they presented three options and outlined the costs and expected revenue. They also predicted that the economy would either improve or stay the same. The probability of the economy staying the same is 0.3 .
The options, costs and expected revenue are given below:
Table 1: Information relating to the three strategic options for change
Describe one disadvantage for an organization of operating at high capacity utilization.