Intermediate: Calculation of production ratios

(a) Explain what you understand by the term a standard hour'.

(3 marks)

(b) The budgeted production for period 7 in the fintshing department of a pottery manufacturer is, 4500 cups, 4000 saucers and 6250 plates. In one standard hour a direct operative is expected to be able to finish either, 30 cups, or 40 saucers, or 25 plates. During period 7, 400 direct labour hours were worked and actual production was. 4260 cups, 6400 saucers and 3950 plates.

Requ1red:

Using the above information calculate for period 7:

(i) the productivity of the direct operatives;

(ii) an appropriate ratio expressing the department's actual production relative to that budgeted;

(iii) another ratio which you consider may be useful to management and explain the meaning of the ratio you have calculated. (7 marks)

(c) Critically examtne the validity of the following statement made by the personnel manager of the above pottery company.

'If the productivity of our direct operatives increases, then the company's profitability will also increase