Utilization is calculated as the ratio of maximum capacity to actual output rate, expressed as a percentage.

Question

BlackTom AI · Accepted Answer

The statement presents a claim about how utilization is calculated. 
Option 1: True. If you claim utilization is true as stated, you would be saying that we divide maximum capacity by the actual output rate and then express as a percentage. However, this is the inverse of the standard definition. 
Option 2: False. In operations management and capacity planning, utilization is typically defined as actual output divided by maximum capacity, multiplied by 100 to get a percentage. This measures how much of the available capacity is being used. 
To see why this matters, imagine a system with a maximum capacity of 100 units per hour and an actual output of 70 units per hour. Using the correct formula (actual / maximum × 100) gives 70%, which reflects how fully the capacity is being utilized. Using the inverse (maximum / actual × 100) would give 143%, which is not interpretable as utilization and would misrepresent performance. 
Therefore, the claim that utilization is calculated as maximum capacity over actual output rate is incorrect, because the standard ratio should be actual output divided by maximum capacity, not the other way around. 
In summary: True misstates the formula; False correctly identifies the proper computation as (actual output / maximum capacity) × 100.

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Utilization is calculated as the ratio of maximum capacity to actual output rate, expressed as a percentage.

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MGS*3100*W10 25 Fall OM Exam 2- Requires Respondus LockDown Browser

Utilization is calculated as the ratio of maximum capacity to actual output rate, expressed as a percentage.

View Explanation

Log in for full answers

Similar Questions

Question at position 36 The optimal capacity utilization for a service organization is 100%TrueFalse

What is the current Capacity Utilization Rate?

Part 1What is​ efficiency?Part 2 A. ​100% utilization B. percentage of design capacity actually used C. effective capacity divided by design capacity D. percentage of effective capacity actually used

Part 1A plant has an effective capacity of 1,0001,000 units per day and produces 920.0920.0 units per day with its product mix. Part 2The plant efficiency​ = [input]enter your response here ​% ​(enter your response as a percentage rounded to one decimal​ place).

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

MGS3100W10 25 Fall OM Exam 2- Requires Respondus LockDown Browser

Part 1What is efficiency?Part 2 A. 100% utilization B. percentage of design capacity actually used C. effective capacity divided by design capacity D. percentage of effective capacity actually used

Part 1A plant has an effective capacity of 1,0001,000 units per day and produces 920.0920.0 units per day with its product mix. Part 2The plant efficiency = [input]enter your response here % (enter your response as a percentage rounded to one decimal place).