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Chapter 16

3.2 Measuring productivity

A productivity measure is a measure of the efficiency of an operation; it
is also referred to as resource utilisation. It relates the goods or services
produced to the resources used, and therefore ultimately the cost
incurred to produce the output.

Productivity measures are usually given in terms of labour efficiency. However
productivity measures are not restricted to labour and can also be expressed in terms
of other resource inputs of the organisation such as the machine hours used for
production.

Productivity is often analysed using three control ratios:

3.3 Production/volume ratio

Standard hours for actual output ÷ total budgeted hours × 100

3.4 Capacity ratio

Actual production hours worked ÷ total budgeted hours × 100

3.5 Efficiency ratio

Standard hours for actual output ÷ actual production hours worked ×
100

Illustrations and further practice

Now try TYU question 3 from Chapter 16

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