Intermediate: Calculation of production ratios NAB Limited has produced the following figures relating to production for the week ended 21 May:

During the week 2800 hours were worked on production.
You are required:

(a) (i) to calculate the production volume ratio and the efficiency ratio for the week ended 21 May; (4 marks)
(ii) to explain the significance of the two ratios you have calculated and to state which variances may be related to each of the ratios; (5 marks)

(b) to explain the three measures of capacity referred to in the following statement:
During the recent recession, increased attention was paid to ‘practical capacity’ and ‘budgeted capacity’ because few manufacturing companies could anticipate working again at ‘full capacity’.

Transcribed Image Text:

Production (in units) Budgeted Actual Product A 400 400 Product B 400 300 Product C 100 140 Standard production times were: Standard hours per unit Product A 5.0 Product B 2.5 Product C 1.0