What is capacity utilization?

Capacity utilization can also be defined as the metric used to calculate the rate at which the prospective levels of output are being met or used. The rate is displayed as a percentage and provides insight into the total utilization of resources and how a company can increase its output without increasing the costs associated with production.

How do you calculate capacity utilization?

The mathematical formula for calculating capacity utilization is: Suppose XYZ Company is producing 20,000 and it is determined that the company can produce 40,000 units. The company’s capacity utilization rate is 50% [ (20,000/40,000) * 100]. If all the resources are utilized in production, the capacity rate is 100%, indicating full capacity.

What is the difference between utilization and actual utilization?

Utilization consumes capacity and is expressed as a percent of capacity - Total allocation / Capacity * 100). For scheduling purposes, utilization is planned utilization or what is assigned to that person. Actual utilization is determined by the actual time charged to the allocated work.