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Budget Ratio FORMULA

This document discusses various budget ratios that provide information about an organization's performance relative to its budget. It defines ratios such as efficiency, activity, calendar, standard capacity usage, actual capacity usage, and actual usage of budgeted capacity ratios. Each ratio is calculated using a formula that divides actual or standard hours by budgeted hours and multiplying by 100 to express as a percentage. The ratios indicate whether performance was favorable or unfavorable compared to the budget.

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Hitesh Sardhara
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2K views

Budget Ratio FORMULA

This document discusses various budget ratios that provide information about an organization's performance relative to its budget. It defines ratios such as efficiency, activity, calendar, standard capacity usage, actual capacity usage, and actual usage of budgeted capacity ratios. Each ratio is calculated using a formula that divides actual or standard hours by budgeted hours and multiplying by 100 to express as a percentage. The ratios indicate whether performance was favorable or unfavorable compared to the budget.

Uploaded by

Hitesh Sardhara
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Budget Ratio

These ratios provide information about the performance level, i.e. the extent of deviation of the actual performance form the budgeted performance and whether the actual performance is favorable or unfavorable. If the ratio is 100% or more, the performance is considered as favorable and if the ratio is less than 100 % the ratio is considered as unfavorable. The following ratios are generally used by the management to measure the development form the budget. Capacity Usage Ratio: - This measures relationship between the budgeted number of working hours and the maximum number of working hours in a budget period. Standard Capacity Employed Ratio: - This ratio indicates the extent to which, the facilities were actually being utilized during the budget period. Level of Activity Ratio: - This may be defined as the number of standard hours equivalent to the work produced expressed as a percentage of the budget of standard hours. Efficiency Ratio: - This ratio may be defined as the standard hours equivalent of the 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 days in the relative budget. Budget Ratio Formulas 1. Efficiency Ratio = (Standard Hours / Actual hours) * 100 2. Activity Ratio = (Standard Hours / Budgeted Hours) * 100 3. Calendar Ratio = (Available working days/Divided budgeted working 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

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