Machine Utilization:

Machine utilization may be defined as the ratio among the actual running time (minute per day) of the machine and the available time (minute per day). That is following  

                 Machine utilization = Actual running time/Time available

Also, it may be otherwise defined as the ratio between the actual output rate (units per minute) and the standard output rate (units per minute).

Overhead is sometimes allocated to machines in proportion to their maximum output capacity that means it may be said that machines with greater capacity are capable of absorbing greater overhead. Although high machine utilization is not redundant as long as it satisfies demand, machine utilization for its own sake is wasteful.

Also, this criteria promotes procurement of high cost machine and thus fewer machines may be purchased which in long run enhance the complexity of job routing and the work in progress inventory. Thus, in turn increases production lead time.