Underutilisation
(Under-utilization).
Formula
Capacity Utilisation (%) = (Actual Output / Maximum Capacity) × 100
Real World
A hotel running at 40% occupancy still pays full mortgage, staff, and utility bills, meaning each occupied room must absorb a disproportionately large share of fixed costs.
Exam Focus
Underutilisation and under-capacity are synonymous — use either, but always explain the fixed-cost-per-unit consequence.
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