Using the data in Extract F, explain one implication of the level of capacity utilisation for the soft drinks manufacturer A, compared to B - Edexcel - A-Level Business - Question 2 - 2017 - Paper 2

Using the same formula for manufacturer B:

$\text{Capacity Utilisation}_{B} = \left( \frac{400,000}{500,000} \right) \times 100 = 80\%$

With a capacity utilisation of 50%, manufacturer A is operating well below its maximum potential. This low level of utilisation indicates that fixed costs are being spread over fewer units. As a result, the average cost per unit for manufacturer A is likely to be higher than that of manufacturer B, which is operating at a higher capacity. Higher average costs can negatively impact competitiveness and profit margins, suggesting that manufacturer A should consider increasing its output to improve efficiency.