Capacity Utilisation

Capacity Utilisation Formula:

\[ \text{Utilisation} = \left( \frac{\text{Output}}{\text{Max Output}} \right) \times 100 \]

Capacity Utilisation:

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1. What is Capacity Utilisation?

Capacity utilisation measures how effectively an organization or system uses its productive capacity. It represents the percentage of potential output that is actually being achieved.

2. How Does the Calculator Work?

The calculator uses the capacity utilisation formula:

\[ \text{Utilisation} = \left( \frac{\text{Output}}{\text{Max Output}} \right) \times 100 \]

Where:

\( \text{Output} \) — Actual production output (units)
\( \text{Max Output} \) — Maximum possible output (units)

Explanation: The formula calculates the percentage of maximum capacity that is currently being utilized by dividing actual output by maximum possible output and multiplying by 100.

3. Importance of Capacity Utilisation

Details: Monitoring capacity utilisation helps businesses optimize production efficiency, identify bottlenecks, make informed decisions about capacity expansion, and improve overall operational performance.

4. Using the Calculator

Tips: Enter actual output and maximum output in the same units. Both values must be positive numbers, and actual output cannot exceed maximum output.

5. Frequently Asked Questions (FAQ)

Q1: What is considered good capacity utilisation?
A: Ideal capacity utilisation varies by industry, but generally 85-90% is considered optimal as it allows for maintenance and unexpected demand spikes.

Q2: What are the risks of 100% capacity utilisation?
A: Operating at 100% capacity can lead to equipment wear, employee burnout, inability to handle unexpected orders, and lack of flexibility for maintenance.

Q3: How often should capacity utilisation be measured?
A: It should be monitored regularly - daily, weekly, or monthly depending on the business cycle and production requirements.

Q4: Can capacity utilisation exceed 100%?
A: Normally no, as it represents actual output divided by maximum capacity. Values over 100% would indicate that maximum capacity needs to be redefined.

Q5: How can businesses improve capacity utilisation?
A: Through better production planning, equipment maintenance, employee training, process optimization, and balancing production lines.