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1. What does a 2% Productivity Ratio mean?
The total manufacturing costs are 2% below the standard cost.
The Sales over Cost ratio this year is 2% better than last year’s value.
The product variable costs per unit are 2% below the standard costs.
2. What is the adjustment made to this year’s sales and cost value as part of the productivity ratio calculation?
The sales and cost values are adjusted for the total number of employees so that the ratio will be on a per person basis.
A volume adjustment is made to account for increased or decreased volume from the previous year.
The sales and costs values are adjusted for inflation and deflation from the previous year.
3. What is different about the calculation for the Variable Cost Productivity Ratio as compared to the Productivity Ratio?
The Variable Cost Productivity Ratio only uses variable costs not total costs.
The Variable Cost Productivity Ratio varies for seasonal adjustments so it only uses the most recent 3 months of data.
The Variable Cost Productivity Ratio subtracts the variable cost from total cost before dividing it by sales.
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