Hoosier Manufacturing operates a production shop that is designed to have the lowest unit production cost at an output rate of 100 units per hour. In the month of July, the company operated the production line for a total of 175 hours and produced 16,900 units of output. What was its capacity utilization rate for the month?

The capacity utilization rate of Hoosier Manufacturing Co. for the month is 96.57%.

Computation:

Given,

Efficient capacity utilization rate =100 units per hour

Operational rate in production line =175 hours utilized

Units produced =16,900 units

First, calculate the total number of units produced in the efficient working hours:

Now, the actual capacity utilization rate will be calculated as follows:

Thus, the capacity utilization rate is 96.57%.

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96.57%

Explanation:

The most efficient capacity utilization rate is 100 units per hour.

The firm used 175 hours and produced 16,900 units in total.

If it had used the hours in the most efficient way, it would have produced a total of:

175 hours x 100 units per hour = 17,500 units

The 16,900 units that it actually produced, as a percentage of the 17,500 units that the firm could have produced is equal to:

16,900 x 100% / 17,500 = 96.57%.

Thus, the capacity utilization rate is 96.57%.

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