Capacity Utilization Rate | CFA® Level 1 Exam Prep

Capacity Utilization Rate

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Capacity utilization rate is -

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Finkel and Tuttle found that the capacity utilization rate, unit labor costs, rate of inflation, and foreign competition were the four major variables that affected the aggregate profit margin. If production increases as a proportion of the total capacity (raising the capacity utilization rate), per-unit fixed production costs and fixed financial costs decrease, thereby raising the profit margin.