Sales Guides

Tuesday, 2 February 2016

Labour Efficiency Variance Formula

Labour efficiency variance formula is given below. Labour efficiency formula concept has been explained with an example below;

Labour Efficiency Variance Formula =(Standard Hours-Actual Hours)x(Standard Rate)

Labour Efficiency Variance Formula Example

Number of Chairs to be produced or make = 1200

Labour hour rate Per Chair is= $ 8

Standard Labour or Expected hour per Chair = 6 Hr

Labour Hour consumed = 6000

Calculate Labour Efficiency Variance

Solution

Standard Hours = 1200 x 6 = 7200 hours

Labour Efficiency Variance = (Standard hours –Actual Hours) x (Standard Rate)

= (7200-6000) x 8

= (1200 x 8)

= 9600 (Favorable Variance)

Significance of Labour Efficiency Variance

Labour efficiency variance is calculated to show the labour performance or labour efficiency. The difference between standard hour required for an activity and actual hours taken by that project or activity is measured at standard rate. Labour efficiency ratio may be either is favorable or unfavorable.

Favorable and unfavorable Efficiency Variance

If actual hours are less than standard hour, then this is favorable labour efficiency variance case, otherwise it would be unfavorable labour variance case.Favorable and unfavorable efficiency variance may be mathematically or logically expressed as under;

Actual Labour Hours> Standard Labour hour = unfavorable Labour Variance

Actual Labour Hours < Standard Labour hour = Favorable Labour Variance

Reasons for Favorable Efficiency Variance

Reasons for favorable efficiency variance include use of skilled labour, use of advanced technology, premium quality material, and performance based reward structure for the employees.

Reasons for unfavorable Efficiency Variance

Reasons for unfavorable Labour efficiency variance include use of unskilled labour, use of poor quality material, and use of outdated machinery and lack of performance based structure.

Other Related Formulas

Labour Efficiency Formula

Labour efficiency formula is given below. Labour efficiency formula has been explained with a simple example.

Labour Efficiency Ratio = Expected Labour Time. X 100

Actual Labour Time

Labour Efficiency Formula Example

Unit Labour Hours = 10 Hours

Total unit produced =500 units

Actual Hours Spent = 4000 Hour

Solution

In first place, Standard hour is to be calculated and then with help of standard hours, we would calculate labour efficiency

1. Standard Hours Calculation

Standard hours = 500 unit x 10 hr= 5,000 hrs

2. Labour Efficiency Calculation

Labour Efficiency Ratio = Expected Time. X 100

Actual Time

5000/4800 x 100

= 125% (Labour efficiency)

Technically 125% efficiency ratio means that efficiency has been 25% above the standard efficiency.

Significance of Labour Efficiency

Labour efficiency ratio information shows employee performance or efficiency during the production process. If expected time is more than actual time, it means Labour performance has been better than standard, otherwise performance is regarded below expectation. Labour efficiency information can be used by the management for employee’s performance evaluation and reward announcement.

Relationship between Labour Time and Efficiency Ratio

The relationship between expected time and actual for efficiency calculation has been shown mathematically.

Expected Time > Actual Time (Efficiency would be more than 100%)

Expected Time < Actual Time (Efficiency would be less than 100%)

Monday, 1 February 2016

Overtime Premium Rate Formula

Formula for overtime premium rate has been given below. This formula has been elaborated with different examples.

Overtime Premium Rate =Basic Rate (1+ % of basic Rate)

Overtime Premium Rate Formula Example

Basic Rate= 12 $

Premium Rate @ 60% of basic Rate

Calculate overtime premium rate & amount for 10 Hours

Solution

Overtime Premium Rate=Basic Rate (1+ % of basic Rate)

12 (1+ 60%)

= 19.2 $ (Rate of overtime Premium)

Amount of overtime = Hr x overtime rate

= 10 Hrs x 19.2

=192 (Amount of overtime)

Overtime Premium Rate (Based on Labour Hour Rate)

Overtime premium rate may be calculated on the bases of basic hour rate of labour, alternatively premium rate can be calculated on the basic rate offered on output or unit produced. Concept of Overtime rate based on basic labour hour has been explained with an example (Above).

Overtime Premium Rate (Based on Unit Produced)

Overtime premium rate may also be calculated on the bases of unit produced. Concept is same as explained above; however, this time premium rate is calculated on the bases of basic rate of unit produced. Concept of overtime premium rate bases on unit produced has been explained with below example.

Example

Unit Produced = 100

Rate = $ 5

More than 100 unit rate is 40% of basic rate

Solution

Premium Rate= $ 5 (1+40%)

Basic 100 units @ 5= 500

Premium Rate 20 @ 7 = 140

Total Labour cost (500+140) = 640

Reason for using Overtime Premium Rate

Reason for using premium rate for overtime is very logical, because labour would only work for more hours, if labour is offered some lucrative rate i.e. (Premium Rate), otherwise labour would prefer to utilize his time in other activities. (Rest, social engagements, playing games)

Overtime Premium Rate Considerations

Premium rate should be clearly define and offered for the labour, labour cost should remain within range, and similarly premium rate should be acceptable for labour to work more. Therefore a well calculated and balanced rate should be offered.

Labour Efficiency Formula
Labour Rate Variance Formula
Labour Piecework Payment Formula
Unit Labour Hours Formula
Labour Saved Formula
Labour Capacity Utilization Formula

Unit Labour Rate Formula

Formula for unit labour hours is given below. Unit labour Hours can be calculated with simple equation. This formula or equation has been explained with two simple examples

Unit Labour Rate Formula = Number of Labour Hours

Number of Unit Produced

Sometime this simple formula becomes huge problem in exam or otherwise. Unit labour hour simply means the labour hour taken to produce single unit. This equation is quite straight forward , when one unit take more than one hour. However, in case of more unit produced by the labour in one hour, then unit labour hour calculation may be tricky.

Unit Labour Rate Formula Example (More units in one Hour)

Unit produced in one Hour = 4

Calculate unit labour hour?

Solution

= ¼

= .25 Hours

It is to be noted that, when more unit are being produced in one hour, it means the unit labour hour would be less than one. We can check the unit labour hour in above example i.e. .25 Hours.

Unit Labour Rate Formula Example ( More Hours for Single unit)

5 hour Taken for single unit

Calculate unit labour hour?

Solution

5/1

= 5 Hours

Labour Efficiency Formula
Labour Rate Variance Formula
Labour Piecework Payment Formula
Unit Labour Hours Formula
Labour Saved Formula
Labour Capacity Utilization Formula

Labour Hours Saved Formula

Formula for labour hours saved has been shown below. This formula has been explained with different simple examples.

Expected Hours > Actual Hours

Labour Hours Saved is a situation, where total labour hour spent is less than standard hour allocated for a work. This concept has been explained by simple example below;

Labour Hours Saved Formula Example

Single Unit Production Hours = 6 Hrs

Total Unit Produced = 4000

Total Actual Labour Hours = 20,000

Calculate Labour Hours Saved?

Solution

In first step, we would calculate the expected hours and then we would calculate the labour hours saved.

1. Expected Hours Calculation

Expected Hours (Standard Hours) = Units Produced x Hour required per unit

=4000 x6

= 24,000

2. Labour Hours Saved Calculation

Actual Labour Hours Taken or Spent= 20,000

Hour saved= Standard Hours – Actual Hours

= 24,000-20,000

=4000 Hours Saved

Significance of Labour Hours Saved Calculation

Labour hour saved provides useful information to the management about the labour efficiency or performance. Such information can be used by the management for performance evaluation and reward announcement.

Labour Hour Saved and Cost Reduction

Labour hour saved technically means the labour cost saved. This explanation stands correct both for a single project or multiple projects undertaken by the company. Cost saving concept has been explained with two examples.

Example 2 (Labour Cost Saved for Single Project)

A project expected labour utilization 20 hours and actually labour taken 15 hour. Standard Labour rate was $ 10. Calculate labour hour and cost saved.

Solution

Expected Cost 20 Hr x 10 Rate = 200

Actual Cost 15 Hrs x 10 Rate = 150

Labour Hours Saved (Expected hour-Actual Hrs) = 20-15 = 5 Hrs

Labour cost Saved = 5 Hrs x 10 Rate = 50

Example 3 (Labour Cost Saved for Multiple Projects)

Company has two projects A and B. Labour required for each project is 20 hours. Rate is 10. First project actually took 10 hour, while second project took 20 hr. Calculate the Labour hour & cost saved by the company.

Solution

1. Expected Cost

Standard Cost of Project A = 20 x 10 = 200

Standard Cost of Project B= 20 x 10 = 200

Total Standard cost or expected cost = 400

2. Actual Cost

Actual Cost = 10 x10 = 100

Actual Cost = 20 x10 = 200

Total cost = 300

Total Saved Cost = 400-300

= 100 (This saving represent the labour hours saved).

Labour Efficiency Formula
Labour Rate Variance Formula
Labour Piecework Payment Formula
Unit Labour Hours Formula
Labour Saved Formula
Labour Capacity Utilization Formula

Labour Capacity Utilization Formula

Labour Capacity Utilization Formula
Labour Capacity Utilization formula has been shown below. Labour capacity utilization formula has been further explained with simple example. Labour Capacity utilization ratio mainly focuses on the actual utilization of available resources.

Labour Capacity Formula = Labour Hour Spent   x 100
                                          Total Available Hour


Labour Capacity Utilization Formula Example
Total Labour Hours available = 1500
Actual Hour utilized or spent = 1200
Calculate Labour Capacity

Solution

Labour Capacity utilized = Hour Spent by Labour   x 100
                                         Total Available hour
= (1200/1500) x 100
= 80%

80% of total capacity utilized, it means that 20% capacity is idle.

Significance of Capacity Utilization Calculation
One of the main reasons for calculating labour capacity utilization is to get information about the capacity utilized and idle Capacity or extra Labour resources. This information can be utilized for the following purposes;

1.   Resource Allocation
Idle resources or capacity can be utilized in another project or activity. Effective utilization will improve the profitability of the organization. Thus capacity utilization information may be used to improve the profitability of the organization.

2.   Cost Reduction
Idle labour resources or capacity may be terminated, if there is no alternate use or immediate future need of such resource. This will reduce labour cost of the company and this reduction in labour cost will improve the profitability of the organization.

3.   Future Resource Planning
Capacity utilization ratio information can be utilized by the management for future resource planning. Management can plan and budget the resource more effectively.

Capacity Utilization and Efficiency
It is important to mention that capacity utilization and labour efficiency has no relationship, it means that capacity utilization ratio does not tell anything about the labor efficiency or performance; rather capacity utilization just focuses on utilization of resources or capacity.

Labour Capacity Utilization Formula Practice Question

Total Labour Hours available = 1800
Actual Hour utilized or spent = 1600
Calculate Labour Capacity

Friday, 22 January 2016

Tableau Desktop 9.3 Version Highlights and Features

Tableau Desktop 9.3 Highlights

Unions: For Excel and text-based data sources, you can now combine tables of data by appending values (rows) from one table to another.
Updates to level of detail expressions and forecasting make it easier for you to answer more questions and explore new scenarios.
New maps data, including postal codes for 42 European countries, helps you conduct your geographical analysis with less effort and the most current information.
Tableau Desktop stays connected to the last server you were signed into. This feature makes it easier for you to share and collaborate when you’re working with Tableau Desktop and Tableau Server or Tableau Online.
Find the right content more quickly now that content analytics and enhanced search capabilities are available in Tableau Server and Tableau Online.
Use revision history to restore previous versions of a published workbook.
Ensure server availability and optimize performance with new server monitoring and configuration features.
Experience faster viz and dashboard load times with 9.3 performance enhancements.