# Budget Ratios
Budget ratios measure the performance of an organisation against the standards/budget set in advance. All ratios are expressed as a percentage.
## 1. Efficiency Ratio
$$\text{Efficiency Ratio} = \frac{\text{Standard Hours for Actual Output}}{\text{Actual Hours Worked}} \times 100$$
Purpose: To find out whether the work was done in more or less hours than the standard allowance.
- > 100% → more efficient than expected
- < 100% → less efficient than expected
## 2. Activity Ratio
$$\text{Activity Ratio} = \frac{\text{Standard Hours for Actual Output}}{\text{Budgeted Standard Hours}} \times 100$$
Purpose: To measure the level of activity of the organisation — whether the firm is operating at 70%, 80%, etc., of its planned activity level.
## 3. Calendar Ratio
$$\text{Calendar Ratio} = \frac{\text{Available Working Days}}{\text{Total Budgeted Working Days}} \times 100$$
Purpose: To check whether all the days/hours planned in the budget period were actually available — captures the effect of unplanned holidays, strikes, etc.
## 4. Standard Capacity Usage Ratio
$$\text{Standard Capacity Usage Ratio} = \frac{\text{Budgeted Hours}}{\text{Maximum Possible Hours in Budgeted Period}} \times 100$$
Purpose: Shows how many hours were planned against the total hours available (maximum capacity).
## 5. Actual Capacity Usage Ratio
$$\text{Actual Capacity Usage Ratio} = \frac{\text{Actual Hours Worked}}{\text{Maximum Possible Hours in the Period}} \times 100$$
Purpose: Shows how many hours were actually worked against the total hours available.
## 6. Actual Usage of Budgeted Capacity Ratio
$$\text{Actual Usage of Budgeted Capacity Ratio} = \frac{\text{Actual Working Hours}}{\text{Budgeted Hours}} \times 100$$
Purpose: Shows how many hours were actually worked against the total budgeted hours.
## Quick Reference Table
| Ratio | Numerator | Denominator |
|---|---|---|
| Efficiency | Standard Hrs for Actual Output | Actual Hrs |
| Activity | Standard Hrs for Actual Output | Budgeted Hrs |
| Calendar | Available Days | Budgeted Days |
| Std Capacity Usage | Budgeted Hrs | Max Possible Hrs |
| Actual Capacity Usage | Actual Hrs | Max Possible Hrs |
| Actual Usage of Budgeted Capacity | Actual Hrs | Budgeted Hrs |
### Useful Identity
$$\text{Activity Ratio} = \text{Efficiency Ratio} \times \text{Actual Usage of Budgeted Capacity Ratio}$$