A Level Business: Capacity utilisation and outsourcing (Cambridge 9609) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 4.3 Capacity utilisation and outsourcing of the Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028 (an AS Level topic). Learn the ideas first in the study guide or the revision notes. Inventory and productivity questions are in the Topic 4 practice set. Course links: the Cambridge A Level Business hub and the checklist.

Questions

1. Define the term capacity utilisation. [2]

2. Pilcombe Dairy can process 90,000 litres of milk a month. Last month it processed 63,000 litres.

(a) Calculate its capacity utilisation. [2] (b) Calculate how many more litres it must process to reach 85% utilisation. [2]

3. Ravensfold Tiles has a maximum output of 40,000 tiles a year. Fixed costs are 240,000 a year and variable costs are 12 a tile. Calculate the cost per tile when it operates at:

(a) 50% capacity utilisation [3] (b) 90% capacity utilisation. [3]

4. State two methods a business could use to improve a low level of capacity utilisation. [2]

5. Using your answers to question 3, explain one impact on Ravensfold Tiles of operating at 50% rather than 90% of maximum capacity. [4]

6. In December Pilcombe Dairy received a rush of orders for cream and processed 99,000 litres, against a normal maximum of 90,000. To do this it ran extra night shifts and postponed machine servicing. Analyse two problems this may cause. [6]

7. Define the term outsourcing and identify one activity a bakery could outsource. [2]

8. Wyndmoor Printing delivers its finished orders using its own van. The in-house service has fixed costs of 60,000 a year and variable costs of 1.10 a delivery. A courier firm offers to make deliveries for 1.90 each. Wyndmoor expects 68,000 deliveries next year.

(a) Calculate the number of deliveries at which the two options cost the same. [3] (b) Advise Wyndmoor whether to outsource, referring to the cost figures and one other factor. [3]

9. Ravensfold Tiles is considering outsourcing its glazing process to a specialist firm. Analyse two possible impacts on Ravensfold Tiles. [6]

10. Holmbury Textiles can produce 48,000 garments a year and produced 33,600 last year. Each garment sells for 30 and has a variable cost of 14. Management is considering two options.

Option A: spend 55,000 on a marketing campaign aimed at export markets, which is forecast to raise output to 40,800 garments a year.

Option B: close one production line, cutting maximum capacity to 36,000 garments a year, saving 90,000 of fixed costs each year at a one-off redundancy cost of 40,000.

Evaluate which option Holmbury Textiles should choose. [10]

Answers

1. The proportion (or percentage) of a business’s maximum possible output [1] that it actually produces in a given period [1]. [2] Examiner insight: a definition that says only “how much a business produces” gives the actual output but leaves out the comparison with the maximum, which is the idea the term depends on.

2. (a) Utilisation = actual ÷ maximum × 100 [1] = 63,000 ÷ 90,000 × 100 = 70% [1]. [2] (b) Required output = 0.85 × 90,000 = 76,500 litres [1]; extra = 76,500 − 63,000 = 13,500 litres [1]. [2] Examiner insight: in part (b) answering 76,500 stops one step short, because the question asks for the increase. Re-read the last words of a calculation question before you box an answer.

3. (a) Output = 0.5 × 40,000 = 20,000 tiles [1]. Total cost = 240,000 + (12 × 20,000) = 480,000 [1]. Cost per tile = 480,000 ÷ 20,000 = 24.00 [1]. [3] (b) Output = 0.9 × 40,000 = 36,000 tiles [1]. Total cost = 240,000 + (12 × 36,000) = 672,000 [1]. Cost per tile = 672,000 ÷ 36,000 = 18.67 (to 2 decimal places) [1]. [3] Examiner insight: write the output at each utilisation level first. Dividing fixed costs by the maximum output, or using the percentage as the output, are common slips that a visible working line makes easy to spot.

4. Any two methods, one mark each [2]. Acceptable methods include: run a promotion or price offer to raise demand; enter new markets or launch new products; take on contract work for other businesses; reduce capacity, for example by closing a line or selling or renting out spare assets. [2] Examiner insight: “state” asks for short, separate methods. Two versions of the same idea, such as “advertise” and “promote”, may count as only one method.

5. At 50% the cost per tile is 24.00 against 18.67 at 90%, a difference of 5.33 [1]. The reason is that fixed costs of 240,000 are shared over only 20,000 tiles rather than 36,000 [1]. This means the firm earns less profit on each tile it sells at any given price [1], so it may need to raise its price, which could reduce sales further, or accept lower profit [1]. [4] Examiner insight: a strong “explain” answer uses the figures from the stem, then follows a chain from cause to effect. Writing only “costs are higher” restates the data rather than explaining it.

6. Candidates may choose any two well-developed problems. Example answer. Problem 1, higher costs: night shifts usually mean overtime or shift premiums [1], and output beyond the normal maximum (110%, from 99,000 ÷ 90,000) strains the machines [1], so unit costs may rise even though fixed costs are shared over more litres [1]. Problem 2, breakdown and quality risk: postponing servicing makes breakdowns more likely [1], and a breakdown at peak season could stop all output and delay orders [1], which could damage the dairy’s reputation with customers who need cream for the holiday trade [1]. [6] Examiner insight: “analyse” needs each problem developed in steps, not listed. Linking the problem to the stem (night shifts, postponed servicing, December orders) is what separates application from general knowledge.

7. Outsourcing is using another business to carry out an activity or process [1] that the firm could do itself. Example activity: delivery of loaves, packaging, payroll or equipment maintenance [1]. [2] Examiner insight: “identify” asks only for an example; any sensible activity for a bakery fits. Writing a paragraph on advantages wastes time on a two-mark question.

8. (a) Break-even volume = fixed cost ÷ (outsourced price − in-house variable cost) [1] = 60,000 ÷ (1.90 − 1.10) [1] = 75,000 deliveries [1]. [3] (b) At 68,000 deliveries in-house cost = 60,000 + (1.10 × 68,000) = 134,800 [1]; the courier would cost 1.90 × 68,000 = 129,200, which is 5,600 less, so outsourcing is cheaper at the expected volume [1]. Other factor, for example: the margin is small and expected volume is below 75,000 by only 7,000, so if demand grows the van becomes cheaper, and a courier may also be less reliable for urgent print orders; recommend outsourcing for now but review as volume changes [1]. [3] Examiner insight: “advise” needs a recommendation that is supported by the numbers. A conclusion with no figure behind it, or figures with no conclusion, each leave part of the question unanswered.

9. Example answer, with any two well-developed impacts. Lower or more predictable costs: a specialist glazing firm may work at greater scale and Ravensfold avoids buying and maintaining glazing kilns [1]. This could cut its unit costs and free money for other uses [1], although the contractor’s price must still be compared with in-house cost [1]. Less control over quality: the finish of a glaze strongly affects tile appearance [1], so poor work by the contractor would produce faulty batches that Ravensfold’s customers blame on Ravensfold [1], damaging its reputation and requiring extra inspection costs [1]. [6] Examiner insight: give impacts on the business, such as cost, control or reputation, rather than “it is good” or “it is bad”. Both a positive and a negative impact are acceptable choices, so long as each is explained.

10. Option A: utilisation = 40,800 ÷ 48,000 × 100 = 85% [1]. Extra output 7,200 garments × contribution 16 = 115,200; less campaign 55,000 gives a gain of 60,200 [1] [1]. This depends on the forecast being met [1]. Option B: utilisation = 33,600 ÷ 36,000 × 100 = 93.3% [1]. Savings of 90,000 a year less 40,000 once give 50,000 in year one and 90,000 a year afterwards [1]. Risks: the ceiling falls to 36,000, leaving little room for growth or a surge [1], and redundancies may harm morale [1]. Judgement: choose A, because it earns more in year one (60,200 against 50,000), keeps capacity for growth and does not depend on cuts [1]; but only if market research supports the forecast, since B’s saving is far more certain, and B becomes the better choice if the export response proves weak [1]. [10] Examiner insight: “evaluate” is rewarded for weighing both options and then reaching a decision with a reason. A strong conclusion states the condition that would change the decision. A calculation without a final choice, or a choice without figures, is only part of an answer.

Where marks are usually lost

• Dividing in the wrong order, or giving 0.7 instead of 70%.
• Stopping at the target output when the question asks for the extra output needed.
• Treating a percentage as a number of units when working out total cost.
• Describing “higher costs” without saying that fixed costs are shared over fewer units.
• Treating operating above maximum capacity as purely good news.
• Listing outsourcing benefits and drawbacks with no link to the business in the case.
• Declaring outsourcing cheaper without comparing costs at the expected volume.
• Giving a recommendation or judgement that does not use the figures or does not answer the question set.

Next steps

• Re-read the study guide for any question you missed.
• Revise from the revision notes.
• Open the Cambridge A Level Business hub and tick off the checklist.
• Find weak spots with the free 10-minute diagnostics.
• Book a free trial class: /trial/.

Frequently asked questions

Which section of Cambridge AS and A Level Business 9609 do these questions cover? Section 4.3 Capacity utilisation and outsourcing, an AS Level topic, including under and over capacity, ways to improve utilisation, and the impact of outsourcing.

What are the most common mistakes in capacity utilisation calculations? Dividing in the wrong order, giving a decimal instead of a percentage, and stopping at the target output when the question asks for the extra output needed.

What does an “analyse” question on capacity need? Each point must be developed in steps, from the cause through to its effect on the business’s costs, quality or customers, using figures from the case. A list of problems with no chain of reasoning scores little.

How do I make an outsourcing recommendation that earns marks? Compare the costs of each option at the expected volume using the figures given, then weigh a non-financial factor such as control over quality before reaching a clear decision.

Official syllabus

Cambridge International AS & A Level Business 9609 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International Education), section 4.3 Capacity utilisation and outsourcing.