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CS Professional · Strategic Management and Corporate Finance · Business Policy and Formulation of Functional Strategy

A Coimbatore pump manufacturer produces 3,000 units per month in a plant whose design capacity is 4,000 units per month, and effective capacity after planned maintenance is 3,600 units. What are the capacity utilisation (against design capacity) and efficiency (against effective capacity)?

Utilisation is 75 percent, found by dividing actual output of 3,000 units by design capacity of 4,000 units. Efficiency is 83.33 percent, found by dividing actual output by effective capacity of 3,600 units. Effective capacity is lower than design because of planned maintenance.

  1. AUtilisation 75%; efficiency 83.33%Correct
  2. BUtilisation 83.33%; efficiency 75%
  3. CUtilisation 75%; efficiency 90%
  4. DUtilisation 90%; efficiency 83.33%

Explanation

Utilisation = actual/design = 3,000/4,000 = 75%. Efficiency = actual/effective = 3,000/3,600 = 83.33%. Option two swaps the two ratios; option three divides by 3,333 incorrectly, and option four uses 3,600/4,000 as utilisation.

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