Capacity utilization rate is a measure of the performance of the company, by judging how close it has been to the best operating level.
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Problem
A company has a factory that is designed so that it is most efficient (average unit cost is minimized) when producing 15,000 units of output each month. However, it has an absolute maximum output capability of 17,250 units per month, and can produce as little as 7,000 units per month without corporate headquarters shifting production to another plant. If the factory produces 10,925 units in October, what is the capacity utilization rate in October for this factory?
Step-by-step solution
Step 1 of 2
Step 2 of 2
Given Data:
However, in the month of October
Thus,
Thus the capacity utilization rate for the given facility is 72.83%
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