Input and Output Ratio:

The Input and Output Ratio is a concept used to measure the efficiency with which inputs are converted into outputs in a production process. It essentially compares the resources (inputs) used in production to the amount of goods or services (outputs) produced.

Explanation:

• Input: Resources like labour, capital, raw materials, etc., that are used in the production process.

• Output: The goods or services produced by utilizing those inputs.

The Input and Output Ratio helps in assessing the productivity and efficiency of a production process. A lower ratio indicates more efficient production, meaning fewer inputs are required to produce a higher output. Conversely, a higher ratio suggests inefficiency, as more inputs are needed for the same level of output.

Formula:

Input-Output Ratio = Total Output Produced / Total Inputs Used​

If a company uses 100 units of input to produce 200 units of output, the ratio would be 0.5 (indicating efficient use of resources).

Capital-Output Ratio (COR):

The Capital-Output Ratio is a key concept in economic planning and productivity analysis, specifically in the context of measuring the efficiency of capital investment. It indicates how much capital is required to produce a unit of output.

Explanation:

• Capital refers to the financial resources, machinery, equipment, and other fixed assets invested in the production process.

• Output refers to the goods or services produced by utilizing that capital.

The Capital-Output Ratio helps to assess how efficiently capital is being used in the economy or in a specific industry. A lower COR suggests that less capital is required to produce a unit of output, which is generally a sign of greater efficiency. A higher COR suggests that more capital is needed to generate a unit of output, which can indicate inefficiency or high capital intensity in production.

Formula:

Capital-Output Ratio (COR) = Capital Used / Output Produced​

For example, if a company uses ₹500,000 of capital to produce 100,000 units of output, the Capital-Output Ratio would be ₹5 per unit of output.

Key Differences:

• Input-Output Ratio deals with all types of inputs (labor, raw materials, energy, etc.), while Capital-Output Ratio specifically focuses on the capital investment (machinery, equipment, etc.) used to produce output.

• Capital-Output Ratio is more focused on capital efficiency, whereas the Input-Output Ratio looks at the overall efficiency of converting all resources into final products.

✅ Efficiency Ratio

The Efficiency Ratio, often referred to in cost and management accounting as the Labour Efficiency Ratio, measures the productivity of labour by comparing the standard hours required to produce a given level of output with the actual hours worked. It indicates how efficiently time has been used in the production process.

📘 Definition:

Efficiency Ratio = (Standard Hours for Actual Output / Actual Hours Worked) × 100

📌 Interpretation:

• If the ratio is 100%, it means the labour force is working exactly at standard efficiency.

• A ratio above 100% indicates greater efficiency, as fewer hours were used than expected for the output achieved.

• A ratio below 100% indicates inefficiency, meaning more time was taken than the standard allowance.

This ratio helps management evaluate operational efficiency, monitor labour productivity, and identify potential areas for improvement in time utilization.

Activity Ratio:

Activity Ratio is a key measure in standard costing and performance evaluation. It reflects the level of activity achieved during a given period compared to the level of activity that was planned or budgeted.

🔍 Definition:

Activity Ratio is the ratio of standard hours for actual production to budgeted standard hours, expressed as a percentage.

📊 Formula:

Activity Ratio = (Standard Hours for Actual Production / Budgeted Hours) × 100

• Standard Hours for Actual Production: These are the hours that should have been required for the actual output achieved, based on standard time per unit.

• Budgeted Hours: These are the total hours the company had planned to use during the period (often based on expected production levels).

🧠 Purpose:

• Measures how well the business utilized its productive capacity.

• Helps management assess if the actual output is above or below the planned capacity.

• A ratio above 100% indicates better-than-expected utilization, while below 100% signals under-utilization.

📌 Interpretation:

✅ Example:

If a company planned 8,000 hours for a month, but produced goods equivalent to 11,000 standard hours:

Activity Ratio= (11,000 / 8,000) × 100 = 137.5%

This means the company performed 137.5% of the planned activity – indicating high efficiency or over-utilization of capacity.