Calculating Capacity Utilisation

• What is capacity in a business context?

  Measure of potential output
• Why is capacity a measure of potential output?

  It indicates maximum achievable output
• How can capacity be measured?

  In various ways depending on the business
• What is capacity utilization?

  Percentage of actual output compared to potential
• How is capacity utilization calculated?

  Actual output divided by potential output
• What does multiplying by 100 in capacity utilization calculation represent?

  Converts the ratio to a percentage
• What is the capacity utilization formula?

  • Capacity Utilization = (Actual Output / Potential Output) × 100
• What is the maximum output of Wolf Dog Foods' production line?

  100,000 cans per week
• What was Wolf Dog Foods' actual production last week?

  87,000 cans
• How do you calculate Wolf Dog Foods' capacity utilization?

  87,000 / 100,000 × 100
• What does an 87% capacity utilization indicate for Wolf Dog Foods?

  It operates below its potential capacity
• What is the new capacity of Wolf Dog Foods after expansion?

  150,000 cans per week
• If capacity utilization was 90%, how many cans did Wolf Dog Foods produce?

  135,000 cans
• How do you calculate the actual output based on 90% utilization?

  150,000 × 0.9
• What is the planned output for Wolf Dog Foods' new organic dog food?

  500,000 cans per week
• What capacity utilization does Wolf Dog Foods aim for with the new range?

  95%
• How do you find the required capacity for 500,000 cans at 95% utilization?

  500,000 / 0.95
• What is the calculated capacity needed for 500,000 cans at 95% utilization?

  526,000 cans
• What are the key steps in calculating capacity utilization?

  1. Identify actual output
  2. Identify potential output
  3. Divide actual by potential
  4. Multiply by 100 for percentage