Under-Capacity
Production capacity below available maximum.
Formula
Capacity Utilisation (%) = (Current Output ÷ Maximum Capacity) × 100
Real World
UK steel producer British Steel operated at well under full capacity for years after demand fell post-2008, meaning high fixed costs were spread across fewer tonnes, pushing up unit costs and threatening viability.
Exam Focus
State the specific effect of under-capacity on unit costs (fixed costs spread over fewer units) to access top marks.
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