# PEV June 04 Q2.1 a

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Registered Posts: 66 Regular contributor ⭐
Hi all,
Can anyone help me with this question.
I am stuck on how to calculate the labour capacity ratio & Labour efficiency ratio. Me and my collegue have been searching through my books but cant seem to find it anywhere.

• Registered, Moderator Posts: 2,034 mod
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Make a note, these are on my short list for 30 Nov. The examiner refers to them in most of his reports but hasn't examined them recently.

They are ratios, but are very similar to the fixed overhead efficiency and capacity variances.

Efficiency ...............standard hours produced
.............................actual hours worked

It shows whether the hours worked were more or less than the standard hours we'd expect.
If it is more than 1 (or100%) that shows an efficient workforce -quicker than standard
If it is less than 1 (100%) an inefficient workforce

Capacity again compares the same things as the variance (Actual hours and budgeted hours)

actual hours worked
.....budgeted hours

If the actual hours worked are more than the budget we will have had more capacity than planned, and the ratio will be more than 1 (100%)
If less, the ratio will be less than 1.
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 19 New contributor 🐸
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Hi
Labour Capacity is Actual Hrs/Budget Hrs
Labour Efficiency is Standard Hrs/Actual Hrs

Hope this helps
Regards Tasha
• Registered, Moderator Posts: 2,034 mod
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In this exam
Actual hours worked: 58,200
Budgeted hours: 60,000
Standard hours: 5 hours per desk (60,000hrs/12,000 desks in the budget) x 11,200 desks produced = 56,000
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered, Moderator Posts: 2,034 mod
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Capacity: 58,200.........0.97 (or 97%)
...........60,000

Efficiency: 56,000.........0.962 (or 96.2%)
...........58,200
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 66 Regular contributor ⭐
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Thanks Sandy.
DO you know what else is likely to come up?
• Registered, Moderator Posts: 2,034 mod
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I'll be covering as much as I think likely on Sat 14 Nov in the revision day in London

for more details

http://www.aat.org.uk/members/events/?type=Student%20Revision%20Course
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 66 Regular contributor ⭐
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Thanks Sandy,
I won't be able to go on the revision course as i can't afford to, i would like to as i found yours really helpful i went on one in for the june exam this year. unfortunately i still failed tho :-( only section 2 i'm mainly struggling with report writing and the life cycle costing.