Dictionary of Accounting Terms: idle capacity
idle capacity
- presence of unused capacity together with insufficient raw materials or skilled labor. When idle capacity exists, a firm can take on an incremental order without increasing the fixed costs.
- economic situation in which the market will not absorb all of the maximum possible output at a price exceeding the variable cost of production. See also capacity.
- capacity that is potentially available but not currently being used, perhaps due to market pressures from competition, distribution constraints, or management policy (such as union contract laws, holidays, overtime rules); also called excess capacity. On the other hand, increased idle capacity may represent the rewards and evidence of improved productivity and efficiencies by operations.
Dictionary of Business Terms: idle capacity
idle capacity
- presence of unused capacity together with insufficient raw materials or skilled labor. When idle capacity exists, a firm can take on an incremental order without increasing the fixed costs.
- economic situation wherein the market will not absorb all of the maximum possible output at a price exceeding the variable cost of production.
