Labour Efficiency Ratio Example

Labour Efficiency Ratio Example

Labour efficiency ratio concept can be explained with following example. It is important to remember that labour efficiency ratio is important tool to monitor the labour performance.

Labour Efficiency Ratio =   Expected Time.   x 100

                                        Actual Time

Example

Standard Hour for producing a chair = 3 Hours

Number of Chairs produced =500 Chairs

Actual labour consumed on production = 1200 Hour

Calculate the labour efficiency ratio

Solution

Standard hours = 500 Chairs x 3 hr= 1500 hrs

Labour Efficiency Ratio =   Expected Time.   x 100

                                        Actual Time

1500/1200 x 100

= 125% (Labour efficiency)

Assuming standard performance is100%, this ratio shows that labour performed 25% well than expectation.