Chapter 6 - Question 5 - P. 36

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.

It can be written either way - what is printed in the notes is equally correct :-)