Question

A company has a factory that is designed so that it is most efficient (average unit cost is minimized) when producing 28,500 units of output each month. However, it has an absolute maximum output capability of 35,000 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 21,270 units in October, what is the capacity utilization rate in October for this factory

Answer 1

Capacity utilization rate in October is 63.75%

Step-by-step explanation:

Units produced in October = 18170

Units production in most efficient way = 28500

Capacity utilization rate in October = 18170 / 28500 = 0.6375

In percentage, it is 63.75%