Which of the following statements is true about capacity utilization and capacity efficiency?
A)Either measure can be used independently of the other.
B)Using one measure only and ignoring the other can lead to misleading conclusions about capacity performance.
C)Capacity utilization can be calculated given capacity efficiency and design capacity.
D)Capacity utilization can be calculated given capacity efficiency and effective capacity.

Question

Quizplus · Accepted Answer

Capacity utilization is the ratio of actual output to the maximum possible output, while capacity efficiency is the ratio of actual output to planned or desired output. Using one measure only and ignoring the other can lead to misleading conclusions about capacity performance. For example, high capacity utilization may seem like a good thing, but it could be achieved at the expense of lower quality or higher costs due to overburdened equipment or employees. On the other hand, high capacity efficiency may indicate that resources are being used optimally, but it may not reflect the actual demand for products or services. Therefore, it is important to consider both measures together to get a more comprehensive view of capacity performance. Choice A, C, and D are incorrect because they do not address the relationship between capacity utilization and capacity efficiency.

Which of the Following Statements Is True About Capacity Utilization