Productive and allocative efficiency GapFill

CAPACITY UTILISATION CALCULATION

The formula to calculate capacity utilisation is: current capacity utilisation /   value limit maximum minimum  possible capacity × 100

UNDER-CAPACITY

The advantage of under-capacity is that there is time for the business to schedule   cash costs maintenance finance  on any machinery.  They are able to accommodate last-minute orders from regular customers.

The disadvantage of under-capacity is the negative   stain mark product brand  image that half-empty cinemas, restaurants, pubs, bars and theatres can have (pre COVID-19).

OVERCAPACITY

The advantage of overcapacity is that in some industries to be too busy can be regarded as a good thing; for example, if a restaurant has a waiting list for customers to dine there, then it gains a   fame history legacy reputation  for quality.  The other main advantage is that by being too busy a business will have increased sales  revenue cash expense amount , which may give it finance to expand. 

The disadvantage of overcapacity is that the business will not be able to cope with last-minute orders, and they won't have time to stop the   automation steel machinery motor  for maintenance.  Staff can also feel under  pressure press force pull  and overworked, which can lead to poor retention and absenteeism rates. 

WAYS TO IMPROVE CAPACITY UTILISATION

A business can improve the capacity utilisation by using   making marketing matt make  and promotional methods to stimulate demand.  For example cinemas have various tie-ins and promotions to get customers in mid-week. 

Alternatively if the business needs additional capacity it can   outoutsource outrank automate production so it can accept the new orders.