PEV - control ratios?

twinmeister

Can someone explain control ratios to me. I know the equations, but I'm struggling with what resultant figures for EFFICIENCY, ACTIVITY and CAPACITY actually tell me?

EAP

twinmeister wrote: »

Can someone explain control ratios to me. I know the equations, but I'm struggling with what resultant figures for EFFICIENCY, ACTIVITY and CAPACITY actually tell me?

I think it's basically:
Activity = production level as a % of budgeted production
Capacity = hours worked as a % of expected hours
Efficiency = (bit harder to explain) how long it took to make the actual output compared to how long it should have taken according to the budget

While we're on the subject - surely we don't need to learn the Efficiency (Productivity) and Capacity Ratios as we already know them:
Efficiency and Capacity Ratios are just Efficiency and Capacity Variances viewed from a different angle. The variances look at the difference (x-y) and the ratios look at one as a proportion of another (x/y)

Efficiency Variance = SR x (SH-AH) Efficiency Ratio = SH/AH
Capacity Variance = SR x (AH-BH) Capacity Ratio = AH/BH

Am I right?

SandyHood

You are right
1 piece of knowledge that enables you to answer 2 types of question

Efficient use of studying time

EAP

Thanks
I feel quite clever now!

twinmeister

After a few hours revision between posts, I think I see what you mean (!).

Control ratios are just the Fixed overhead volume ratio splits (FOEfficiencyV and FOCapacityV) viewed from a different perspective.

I was looking at control ratios as part of the 'measuring performance' sections in the Osborne textbook (ie. with all the other performance ratios).

It is all starting to hang together, but I don't feel clever yet!
Thanks for your help