Question

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?

Answer 1

Answer:

The capacity utilization rate for month of October is 72.83%.

Explanation:

FORMULA FOR CALCULATING CAPACITY UTILIZATION RATE -

= ACTUAL CAPACITY / MOST EFFICIENT CAPACITY

GIVEN INFORMATION -

Actual capacity for month of October - $10,925

Most efficient capacity - $15,000

Putting these values in formula -

= $10,925 / $15,000

= .7283

Now multiplying it by 100 to convert it in to percentage

= .7283 x 100

= 72.83%