Capacity Utilization

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Description of Capacity Utilization. Explanation.

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Definition Capacity Utilization. Description.

Capacity Utilization is the extent to which a firm or a plant or a machine actually uses its installed productive capacity. Thus, it refers to the relationship between actual output produced and potential output that could be produced with the installed equipment, if its capacity was fully used.

It is one of the ten Cost Drivers described by Porter.

The capacity utilization at a point in time can be dependent on seasonal, cyclical or other demand fluctuations.

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End of description Capacity Utilization. An explanation.