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These ratios provide information about the performance level, i.e., the extent of deviation of actual performance from the budgeted performance and whether the actual performance is favourable or unfavorable. If the ratio is 100% or more, the performance is considered as favourable and if ratios is less than 100% the performance is considered as unfavourable.
The following ratios are usually used by the management to measure development from budget.
Capacity usage ratio: This relationship between the budgeted number of working hours and the maximum possible number of working hours in a budget period.
Standard capacity employed ratio: this ratio indicates the extent to which facilities were actually utilized during the budget period.
Level of activity ratio: This may be defined as the number of standard hours equivalent to work produced expressed as a percentage of the budget of standard hours.
Efficiency ratio: this ratio may be defined as standard hours equivalent of work produced expressed as a percentage of the actual hours spent in producing the work.
Calendar ratio: This ratio may be defined as the relationship between the number of working days in a period and the number of working das in the relative budget period.
Budget Ratios :
1. Efficiency Ratio = (Standard hours ÷ Actual hours) × 100
2. Activity Ratio = (Standard hours ÷ Budgeted hours) × 100
2. Activity Ratio = (Standard hours ÷ Budgeted hours) × 100
3. Calendar Ratio = (Available working days ÷ budgeted working days) × 100
4. Standard Capacity Usage Ratio = (Budgeted hours ÷ Max. possible hours in the budgeted period) × 100
5. Actual Capacity Usage Ratio = (Actual hours worked ÷ Maximum possible working hours in a period) × 100
6. Actual Usage of Budgeted Capacity Ratio = (Actual working hours ÷ Budgeted hours) × 100
4. Standard Capacity Usage Ratio = (Budgeted hours ÷ Max. possible hours in the budgeted period) × 100
5. Actual Capacity Usage Ratio = (Actual hours worked ÷ Maximum possible working hours in a period) × 100
6. Actual Usage of Budgeted Capacity Ratio = (Actual working hours ÷ Budgeted hours) × 100
