Question

A company has a factory that is designed so that it is most efficient (average unit cost is minimized) when producing 21,200 units of output each month. However, it has an absolute maximum output capability of 26,000 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 14,360 units in October, what is the capacity utilization rate in October for this factory

Answer 1

Capacity utilization rate in October for this factory is 67.74%

Step-by-step explanation:

Units produced in October = 14,360 units

Units production in most efficient way = 21,200 units

Capacity utilization rate in October = 14,360 / 21,200

Capacity utilization rate in October = 0.677359

Capacity utilization rate in October = 67.74%.