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Capacity Utilisation and Fixed Costs

Level:
A-Level, IB Diploma
Board:
AQA, Edexcel, Eduqas, IB, OCR, WJEC

Last updated 22 Sept 2020

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In this video we use Premier Inn as a mini case study in the economic importance of spare capacity for a firm’s operating costs.

Capacity Utilisation and Fixed Costs

Capacity is a measure of how much output a business can produce over a given period e.g. customers per day, capacity of units from a production line.

Capacity utilisation measures the proportion (percentage) of a firm’s total capacity is used over a given time period. i.e. (actual output / capacity) x 100%

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