Andria Lynch shares a chart she produced that gives the proper size of text to use for different drawing scales.
“Attached is a handy chart for sizing text in standard viewport scales to be uniform in layout space. All of our noting is done in model space, so this is handy to have where I can see it all the time for a quick reference. It is also useful when creating dimension styles. If you have a dimension style that is set up to use in paper space with the overall scale set to 1, you can simply plug in the scale factor as the new overall scale and set up a new dimension. For example, I dimension everything in model space, but display things at different scales in the layout space, so I use different dimension scales for each view. I have a dim scale for things at 1/8” = 1’-0”, 1/16” = 1’-0”, etc., and for the dimension named 1/8” = 1’-0”, I set the overall scale to 96 so that all the dimensions appear uniform in layout space.”
NOTES FROM CADALYST TIP PATROL: The chart contains the scale factors for text that will print with a height of either 3/32” or 1/8”. It would be very easy to add other sizes to this chart, or even produce formulas in the spreadsheet that will automatically calculate the proper size for you. In AutoCAD, you can also use Scaled Annotated Text (and dimensions) if you are labeling in model space. These types of text will automatically scale themselves to display at a set height. They are little tricky, but very useful.