Lesson Plan

• Describe the concept of capacity utilisation rate and differentiate between operating under and over capacity.
• Calculate capacity utilisation rates using the standard formula.
• Analyse the financial and operational impacts of under‑capacity and over‑capacity on a business.
• Evaluate strategic options (investment, outsourcing, efficiency, product‑mix, demand management) when capacity limits are approached.
• Apply the concepts to a real‑world scenario and recommend appropriate actions.

• Projector and screen
• Whiteboard and markers
• Printed worksheets with capacity tables
• Calculators
• Case‑study handout (furniture manufacturer)
• Formula sheet for CUR
• Sticky notes for group brainstorming

Imagine a factory that can build 10,000 chairs each month but sometimes produces far fewer or far more. You already understand fixed and variable costs, so today we’ll explore how using too much or too little capacity affects those costs. By the end of the lesson you will be able to calculate capacity utilisation, explain its impacts, and suggest strategic responses.

1. Do‑now (5'): Quick mental‑math task – estimate the cost per unit if output falls from 10,000 to 7,500 units.
2. Mini‑lecture (10'): Define maximum capacity, capacity utilisation rate (CUR), and the difference between under‑ and over‑capacity.
3. Guided calculation (10'): Work through the furniture example, calculate CUR for months A (75%) and B (112%).
4. Group analysis (15'): Examine impact tables, discuss advantages/disadvantages of under‑ and over‑capacity, record key points on sticky notes.
5. Strategic decision activity (10'): In small groups choose an appropriate strategic response for a given scenario and justify the choice.
6. Plenary (5'): Recap main ideas; exit ticket – “What is the biggest risk of operating over capacity?”

We reviewed how capacity utilisation influences costs, profitability, and operational risk, and we practiced calculating CUR and evaluating strategic options. Please hand in your exit tickets, and for homework research a local business to estimate its capacity utilisation and suggest one improvement.