Capacity utilisation

• capacity utilisation = a measure of the extent to which the productive capacity of a business is being used
• Capacity utilisation equation = current output / maximum potential output X 100
• Impacts of under-utilisation = reduced productivity, reduced profit, reduced employment, reduced tax revenue
• impacts of over-utilisation = average costs increase due to falling levels of efficiency, diseconomies of scale, workers may leave due to over working
• improving capacity utilisation = increase staff workforce hours, maybe outsource parts of production, encourage over time, reduce capacity