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Dear Sir,
Could you please kindly explain this question?
Chapter 6 – Question 5 – P. 36
Thank you very much.
From the budget figures, each unit should take 8000/20000 = 0.4 hours.
So the actually production should have taken 25,000 x 0.4 = 10,000 hours.
It actually took 11,000 hours, so the efficiency ratio is 11000/10000 = 110%
I see. I am a little confused right now, because in your notes results, p.172, it goes as follows:
actual hours worked = 11000
standard hours for the actual production= 25000 / 20000 × 8000= 10000
Efficiency ratio = 10000 / 11000 = 90.9%What’s the correct one?
Thank you
Sorry – I mistyped.
I should have written 10,000/11,000 🙁
(However I am confused – since you have the formula in the lecture notes, and since you have the answer at the back of the lecture notes, then why did you ask this question???)
Because I don’t understand the logic behind this step
“standard hours for the actual production= 25000 / 20000 × 8000= 10000”
Why have you not read my earlier reply!
Each unit should take 0.4 hours (from the budget figures).
Therefore to make 25,000 units should have taken 25,000 x 0.4 hours = 10,000 hours.
Using simple arithmetic it is slightly faster to say they should have taken 25,000/20,0000 x 8000 = 10,000 (but how you get to the 10,000 hours is completely irrelevant (except for the fact that there is enormous time pressure in the exam).)
Ok, now I understand why I got confused.
Because in the notes results it is written
“standard hours for the actual production= 25000 / 20000 × 8000= 10000”
While it should be written 25000/(20000/8000)=10000.
Now I got it.
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