Analyse one possible impact on a business of operating at below maximum capacity.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2024). The mark or mark type is shown in brackets.

1. [1] low output
2. [1] wasted resources
3. [1] not competitive
4. [1] adaptability
5. [1] reduced costs
6. [2] could produce more output with current resources but isn't doing so
7. [2] available resources are not being used fully e.g. workers and machines idle
8. [2] paying fixed costs in areas which are not being fully used
9. [2] business is inefficient as resources not fully utilised
10. [2] able to respond to unexpected increase in demand
11. [2] buying less inventory
12. [2] if demand exists the business could be earning more revenue and profit
13. [2] fixed costs are spread over lower level of products so cost advantages are lost
14. [2] discounts from bulk purchases may not be available so prices may need to increase
15. [2] payment on fixed costs, resources not being fully used will increase the average costs of production
16. [2] business will be less competitive in the market than its rivals
17. [2] business could fail if high costs are not covered by sales of few outputs
18. [2] take advantage of opportunities with resources which are not being used
19. [2] need less storage space, might use JIT to reduce costs and waste