Underutilisation
(Under-utilization).
Formula
Capacity Utilisation (%) = (Actual Output / Maximum Possible Output) × 100
Real World
During the 2020 pandemic, airline fleets sat grounded — British Airways still paid fixed costs (leases, maintenance) on aircraft flying at near-zero capacity, causing unit costs to soar.
Exam Focus
Show that fixed costs spread over fewer units raises unit cost — this numerical chain earns application marks.
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