$7.$ In manufacturing, capacity represents the work that could be performed if all the resources of the factory are used to their full potential. For example, running three shifts a day, a factory should be able to perform to their full potential. For example, running three shifts a day, a factory should be able to produce a given output per year. A management accountant could then compute unit cost using $\text{'}\text{'}$practical capacity'$\text{'}$ or $\text{'}\text{'}$actual utilization'$\text{'}$ as a base. In a manufacturing setting, the argument in favor of using practical capacity as a denominator to compute unit costs is that it eliminates the effect of volume differences on cost computation, and that it suggests what a product should cost if capacity is fully utilized. On the other hand, practical capacity can be arbitrary, masks the actual costs, and may be difficult for non$-$accountants to understand. What is the relevance of capacity considerations in a medical practice? To benchmark against other practices, should FMMG compute the cost of each unit of service delivered on a capacity base or an actual volume base?. When would capacity or actual volume bases be most appropriate in medical practices?