Capacity Utilisation

Capacity utilisation within a business can be easy or hard to calculate, for a printing shop, it is easy to calculate how many sheets they can produce per hour for example and in a metal fabricators, it is easy to calculate how many sheets of metal they can produce per hour, however for a company that has varied demand, it can be very hard to predict how much the business should utilise its capacity, a clearly noticeable example would be an understaffed restaurant, although they have staff working the shift, it is clear that they did not account for the demand… Continue reading Capacity Utilisation

Trade-offs and Opportunity Cost

What is Trade-offs and Opportunity Cost? Trade-offs are choosing one thing over another, if you choose to invest in paint over pencils, your opportunity cost, is that you can no longer colour with pencils. This is a poor example, so lets look at some real data so we can get a good understanding of what opportunity cost is really about, and for that we need an example. Nails and Hammers LTD. A company, called Nails and Hammers LTD, produces hammers and nails, they have a good reputation, but are not really known, they also manufacture their hammers cheaply and therefore some… Continue reading Trade-offs and Opportunity Cost