4.2 Operational Performance (AQA A Level Business): Flashcards
Exam code: 7132
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Define labour productivity.
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Define labour productivity.
Labour productivity measures output per worker over a period of time.
What is the formula for labour productivity?
Labour productivity = output ÷ number of workers.
A business produces 46,000 units with 50 workers. What is labour productivity?
46,000 ÷ 50 = 920 units per worker.
Output is 69,000 units with 60 workers. What is labour productivity?
69,000 ÷ 60 = 1,150 units per worker.
Higher labour productivity lowers the labour cost per unit, improving a business's .
Higher labour productivity lowers the labour cost per unit, improving a business's competitiveness.
Define unit cost.
The unit cost is the average cost of producing one unit of output.
What is the formula for unit cost?
Unit cost = total cost ÷ total output.
Fixed costs are £11,625 for 15,500 bottles, with a variable cost of £0.42 per bottle. What is the unit cost?
(£11,625 ÷ 15,500) + £0.42 = £0.75 + £0.42 = £1.17.
Unit costs usually fall as output increases, because fixed costs are spread over more .
Unit costs usually fall as output increases, because fixed costs are spread over more units.
Define capacity.
Capacity is the volume of products a business can produce at a given time with its available resources.
Name two factors that determine a business's capacity.
Buildings/space, equipment/technology, number/skills of workers, supplier reliability, finance, expected demand, and seasonality (any two).
Define capacity utilisation.
Capacity utilisation measures how effectively a business uses its assets, comparing current output to maximum possible output.
What is the formula for capacity utilisation?
Capacity utilisation = (current output ÷ maximum possible output) × 100.
Output is 51,420 units against a maximum of 68,400. What is capacity utilisation?
(51,420 ÷ 68,400) × 100 = 75%.
Give one implication of low (under-)capacity utilisation.
Higher unit costs (fixed costs over fewer units) and under-deployed workers, though it provides flexibility.
Give one implication of very high (over-)capacity utilisation.
Lost flexibility, staff under pressure, and machinery breakdowns — but lower unit costs and greater competitiveness.
True or False?
High capacity utilisation minimises unit costs.
True.
Running near full capacity spreads fixed costs over more output, minimising unit costs.
True or False?
Capacity utilisation is calculated as maximum output divided by current output.
False.
It is current output ÷ maximum possible output × 100 — not the other way round.
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