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For the formula for the capacity ratio, we calculate the ratio regardless of the units produced ? Because for the notes test qn 4, I calculated the time budgeted to produced 250000 units,
(8000/20000)*25000=10000, which I then did 11000/10000*100% which I arrived at option a for the answer. However the correct answer did not standardize the units produced so I am wondering if this is the case?The capacity ratio is actual hours worked / budgeted hours.
(what you are doing is calculating standard hours, but this is not relevant for the capacity ratio).Actual hours = 11,000
Budgeted hours = 8,000The capacity ratio is simply looking at whether we got more or less hours of labour than we budgeted to get.
Oh, I see. Thank you for the reply. I will keep that in mind when calculating the labour capacity ratios.
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