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4 marksCapacity Planning and Layout Strategies

CAPE Management of Business Unit 2 · 2014 · Paper 2 · Question 2(a)(iii)

Drinks-a-Lot manufactures energy drinks profitably in the Caribbean. With market expansion, the firm wishes to grow and is considering outsourcing, though the production manager cautions against potential diseconomies of scale.

Distinguish between 'economies of scale' and 'diseconomies of scale'.

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Other parts of this question

  1. 2(a)(i)State the meaning of the term 'outsourcing'.[1 mark]
  2. 2(a)(ii)Outline TWO ways in which outsourcing can improve the quality of products.[4 marks]
  3. 2(b)Outline TWO ways in which Drinks-a-Lot can increase its capacity.[4 marks]
  4. 2(c)Discuss THREE disadvantages to Drinks-a-Lot if it operates at full capacity over the long term.[12 marks]

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