Kecks Bottling Company produces 2-liter soda bottles in its Somerset plant using an injection-molding machine that has a theoretical capacity of 60,480 bottles per week. For the most recently completed week, the company's capacity cost management system reported actual production of 15,144 bottles. This represented 72% utilization of the machine's normal capacity of 21,168 bottles. Based on this rate of capacity utilization, line managers are advocating for the acquisition of an additional injection-molding machine. What measure of capacity utilization would provide a better signal of the need for an additional machine?
A) Capacity utilization based on theoretical capacity.
B) Capacity utilization based on market demand.
C) Capacity utilization based on normal capacity adjusted for the efficiency waste variance.
D) Capacity utilization based on productive capacity adjusted for idle capacity.

Question

Quizplus · Accepted Answer

Using capacity utilization based on theoretical capacity provides a clearer picture of how much of the machine's full potential is being used, highlighting whether the current machine is underutilized and if an additional machine is truly necessary.

Kecks Bottling Company Produces 2-Liter Soda Bottles in Its Somerset