Question

If the actual output of a piece of equipment during an hour is 500 units and its best operating level is at a rate of 400 units per hour, which of the following is the capacity utilization rate?

a. 1.33
b. 1.00
c. 0.75
d. 1.25

Answer 1

d. 1.25

Step-by-step explanation:

In a business context, the capacity utilization rate is a value that allows the company know how well they are performing compared to what the recorded optimal levels are. In order to calculate this value we simply divide the current operating level for a specific time-period by the optimal level of that same time period, which in this case would be 1 hour. Therefore, in this case we would divide 500 by 400 which would give us 1.25.