Labor cost ratio

This quotient portrays the relationship between labor cost and sales volumes especially in a production set up.

Applicability of Labor Cost Ratio in Decision Making by Management

Labor cost policy: The management need to lay a strategy to ensure that labor is fully utilized to avoid idle workers.

Labor compensation policy; the management need to set policy to ensure workers are compensated as per their qualifications based on whether they are;

Skilled

Semi-skilled

Unskilled

This ensures that the costs for laborers are well regulated