Always Ready Manufacturing currently uses normal capacity as its baseline in analyzing capacity utilization. It has asked
Question:
Always Ready Manufacturing currently uses normal capacity as its baseline in analyzing capacity utilization. It has asked you to compare its numbers to those it would get using theoretical capacity to determine what degree of actual utilization it is getting from its machines. The data it provides you with for the current year is:
• Current actual capacity utilization 5,000,000 pieces.
• Normal capacity utilization 4,500,000 pieces.
• Theoretical capacity utilization 20,000,000 pieces.
What is its actual capacity utilization rate using theoretical capacity? Normal capacity? What different message would each of these measures send to senior management about process performance?
Step by Step Answer:
Managerial Accounting An Integrative Approach
ISBN: 9780999500491
2nd Edition
Authors: C J Mcnair Connoly, Kenneth Merchant