Capacity Utilization Rate Formula | Calculation (with examples)

In this video we discuss Capacity utilization rate formula in detail including some practical examples and excel Template

𝐂𝐚𝐩𝐚𝐜𝐢𝐭𝐲 𝐔𝐭𝐢𝐥𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐑𝐚𝐭𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Capacity utilization Rate Formula is used to assess a company’s operational efficiency.

Capacity utilization Rate Formula is also used to measures the realized potential output.
It is important because it tells the company how much they can still utilize.

Below is the the capacity utilization rate formula

𝗖𝗮𝗽𝗮𝗰𝗶𝘁𝘆 𝗨𝘁𝗶𝗹𝗶𝘇𝗮𝘁𝗶𝗼𝗻 𝗥𝗮𝘁𝗲 𝗙𝗼𝗿𝗺𝘂𝗹𝗮 = 𝗔𝗰𝘁𝘂𝗮𝗹 𝗢𝘂𝘁𝗽𝘂𝘁 / 𝗣𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝗢𝘂𝘁𝗽𝘂𝘁 * 𝟭𝟬𝟬

𝐂𝐚𝐩𝐚𝐜𝐢𝐭𝐲 𝐔𝐭𝐢𝐥𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐑𝐚𝐭𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚 𝐄𝐱𝐚𝐦𝐩𝐥𝐞
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Star Label Company can produce 80,000 Labels per month.

Last year of 2018, they produce only 60,000 stickers due to the absence of employers.

Here we need to find out the the capacity utilization rate of Star Label Company.

We already know the actual output of Star Label Company in the last month of 2018, i.e. 60,000 labels.

The potential output is 80,000 labels.

So using the formula of capacity utilization rate, we get –

Capacity Utilization Rate = Actual Output / Potential Output * 100

= 60,000 / 80,000 * 100 = 66.67%.

So the capacity utilization rate of Star Label Company is 75.00%

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[vijayanand]

This is not right... You are saying that the decrease in production is due to absence of full capacity .. so the potential output must have been revised for the present strength...