Capacity Utilization Rate
- Capacity Utilization Rate
- A metric used to measure the rate at which potential output levels are being met or used. Displayed as a percentage, capacity utilization levels give insight into the overall slack that is in the economy or a firm at a given point in time. If a company is running at a 70% capacity utilization rate, it has room to increase production up to a 100% utilization rate without incurring the expensive costs of building a new plant or facility.
Also known as "operating rate".
Graphically:
Capacity utilization rates can also be used to determine the level at which unit costs will rise. For instance, let's say that Company XYZ currently produces 10,000 widgets at a cost of $0.50 per unit. If it is determined that it can produce up to 15,000 widgets without costs rising above $0.50 per unit, the company is said to be running at a capacity utilization rate of 66% (10,000/15,000).
This is best applied to companies that produce physical goods rather than services, as the capacity measurements are much easier to quantify.
Investment dictionary.
Academic.
2012.
Look at other dictionaries:
capacity utilization rate — noun The percentage of the capacity of a device or system that is being used productively. Syn: capacity utilization, utilization rate … Wiktionary
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Capacity utilization — is a concept in economics and managerial accounting which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity. Thus, it refers to the relationship between actual output that is produced with the … Wikipedia
capacity utilization — noun The percentage of the capacity of a device or system that is being used productively. Syn: capacity utilization rate, utilization rate … Wiktionary
utilization rate — noun The percentage of the capacity of a device or system that is be used productively. Syn: capacity utilization rate, capacity utilization … Wiktionary
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Operable utilization rate — Represents the use of the atmospheric crude oil distillation units. The rate is calculated by dividing the gross input to these units by the operable refining capacity of the units. U.S. Dept. of Energy, Energy Information Administration s… … Energy terms
Operating utilization rate — Represents the use of the atmospheric crude oil distillation units. The rate is calculated by dividing the gross input to these units by the operating refining capacity of the units. U.S. Dept. of Energy, Energy Information Administration s… … Energy terms
Refinery utilization rate — Represents the use of the atmospheric crude oil distillation units. The rate is calculated by dividing the gross input to these units by the operable refining capacity of the units. U.S. Dept. of Energy, Energy Information Administration s… … Energy terms
