Capacity Utilisation

Capacity Utilisation

1. Productive capacity

   • Total level of production or output that it could give in any given amount of time

2. Percentage of the firms total production capacity that is being used

3. Formula:Current output/ Maximum output X 100

   • Company can make 10,000 units (Productive capacity) Company currently making 7000 units (70%)

4. Why don't all businesses work at 100% Capacity?

   • Not enough time for routine maintenance which means machines may break
   • May not be possible to meet new or unexpected orders so the business can not grow without expanding its scale of production
   • Busy working space, untidy, less efficient
   • Staff may feel under excessive pressure and therefore make mistakes