Question

Why does a higher utilization rate lead to higher productive efficiency?

Answer 1

Why does a higher utilization rate lead to Higer productive Efficiency :

Capacity Utilization mean = Actual Output /Potential Output * 100

Capacity Utilization rate is an important operational metric for business purpose . The concept of capacity Utilization is best applied to the production

Capacity utilization rate is also a key economic indicator . A company wit less than 100% utilization can theoretically increase production without incurring any expensive overhead cost

Capacity utilization rate will help us to understand any companies current Operating Efficiency and it will definitely helpful to understand cost structure of the company

Definitely capacity utilization rate changes according to production volume in relates to change in demand.

Whenever economy is down or increase in unemployment rate , demand automatically going down and impact on Utilization

Definitely low capacity Utilization is concern for company as well as Economy

Capacity utilization is an important measurement relates to Productive efficiency

Higher utilization rate can reduce unit cost , making business more competitive

We noticed that business run with lower capacity mainly due to lower demand in the market , loss of market share and seasonal disturbance

Need to ensure that excess demand with excess capacity utilization sometime disturb Quality + Employee effectiveness