Capacity utilisation
Capacity utilisation: actual output expressed as a percentage of available (practical) capacity — how much of a factory, hotel or fleet is actually being used.
See it move
A hotel has 200 rooms available to sell each night and averages 164 rooms occupied over the month, so capacity utilisation is 164 divided by 200, times 100, or 82%. That figure is what is actually used against practical capacity, the theoretical maximum already excluded, and it directly drives how thinly the hotel's fixed costs are spread across the rooms sold.
The formula
Variables
- Capacity utilisation (%)
- Actual output (units)
- Practical (available) capacity (units)
Gives the percentage of available (practical) capacity a business actually used in the period.
Check yourself
A factory has a practical (available) capacity of 10,000 units per month, though its theoretical maximum, running continuously with no downtime at all, is 12,500 units per month. This month's budgeted output was 8,750 units, and actual output was 8,000 units. What is the factory's capacity utilisation for the month?