Question 1
Question 1(b)(i)
(a)
Refer to Table 1.1. Calculate NS's capacity utilisation in 2024.
[ 3 ]
Question 1(b)(ii)
(b)
Explain one possible disadvantage to NS of high capacity utilisation.
[ 3 ]
CAIE A-Level Business 4.3 Capacity Utilisation and Outsourcing Question Bank
Practise calculating capacity utilisation and analysing under- or over-capacity effects, improvement methods and outsourcing decisions before judging the best operational response.
Exam points
- calculate capacity utilisation as actual output divided by maximum output, multiplied by 100
- analyse spare or excess capacity through unit cost, quality, delivery, morale and lost demand
- evaluate improvement or outsourcing using forecast demand, control, flexibility and supplier risk
Covered syllabus points
Question 2(a)(ii)
[Maximum number: 3]
Law Advice Forum (LAF)
Drake has a law degree and works for a partnership of lawyers during the day. Drake owns a website that gives free legal advice. He works on the website in the evenings and at the weekend.
He started the website as a hobby, but the website has grown to over 20000 users and he now sells advertising on his videos and on the website.
Drake uses outsourcing for some areas of his website. He has recently been sent a report showing variances in the budget from the previous month (see Table 2.1).
Table 2.1 Budget report for Drake's website in the previous month
Drake has now left his job and is focusing full time on the website. He rebranded the website as Law Advice Forum (LAF). Drake's business plan for LAF included:
- Operating as a sole trader.
- Continuing to develop and expand the website to provide legal advice and paid legal services.
- Renting an office in city G where all employees would work.
- Hiring five fully qualified lawyers.
- Hiring three administrators.
- Leasing IT equipment.
However, Drake is concerned about the limitations LAF will face as a labour intensive operation.
Explain the term outsourcing.