Labour Piecework Formula

Labour Piecework Formula

Piecework is production based labour payment system. in piecework payment system labour is paid on the bases of unit produced by them. Formula for Piecework payment is

Labour payment = Unit Produced x Rate per Unit

Example

Total units produced by the labour= 6000

Rate of Labour payment per unit is = $ 5

Calculate labour payment?

Solution

 Labour payment = Unit Produced x Rate per Unit

= 6000 x 5

= 30000 $

Labour Rate Variance Formula

Labour Rate Variance Formula

Labour rate variance is difference between the actual rate of actual labour and standard rate of actual labour. Labour rate variance may be favorable or adverse.  Labour rate variance can be calculated following equation or formula

Actual Quantity x (Actual rate- Standard Rate)

Example

Actual Labour on the production of Product X = 5000

Number of Unit produced of Product X = 1500

Standard Labour per unit of product X = 7 hr

Standard Rate = $6

Actual Labour Cost = 50,000

Calculate Labour rate Variance

Solution

Actual Cost per unit = 50,000/5000=10

Actual Quantity x (Standard Rate-Actual Rate)

= 5000 x (6-10)

= 5000 x -4

= -20000 (unfavorable)

Labour Efficiency Variance Formula

Labour Efficiency Variance Formula

Labour efficiency variance is calculated to show the labour performance. The difference between standard hour & actual hours is measured at standard rate. Labour efficiency ratio may be favorable or unfavorable. Labour efficiency variance can be calculated by the following formula

Actual > Standard hour = unfavorable Labour Variance

Actual Hours < Standard hour = Favorable Labour Variance

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

Example

 Table to be produced = 600

Standard Labour hour rate per table is= $ 6

Standard Labour hour needed per Table = 4 Hr

Actual hour taken was 1800 Hours

Calculate Labour Efficiency Variance

Solution

Standard Hours = 600 x 4 = 2400 hours

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

= (2400-1800) x 6

=(600 x6)

= 3600 (Favorable Variance)

Labour Efficiency Ratio Formula

Labour Efficiency Ratio Formula

Labour efficiency ratio is calculated by dividing the expected or standard labour hours with actual time taken by labour. This ratio explains the performance or efficiency of labour work force.

Labour Efficiency Ratio =   Expected Time.   x 100

                                        Actual Time

Example

Labour hour required for per unit production of equipment A = 8 Hours

Total Number of unit produced =400 units

Actual hour taken in production = 4000 Hour

Solution

Standard hours = 400 unit x 8 hr= 3200 hrs

Labour Efficiency Ratio =   Expected Time.   x 100

                                        Actual Time

=3200/4000 x 100

= 80% (Labour efficiency)

Labour efficiency has been 80%, which is 20% below than expectation

Overtime Premium Rate Formula

Overtime Premium Rate Formula

Overtime premium rate can be calculated following formula. it is important to remember that overtime premium rate is usually expressed as % of basic rate.

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

Example

Basic rate of wages per hour= 6 $

Premium rate is 70% of the basic wage rate

How much overtime shall be paid for 10 hours?

Solution 

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

 6 (1+ 70%)

= 10.2 $ per hour (Premium Rate)

Amount of overtime = Hr x overtime rate

= 10 x 10.2

=102 (Overtime for 10 hours)

Overtime Premium Rate Formula

Overtime Premium Rate Formula

Overtime premium rate can be calculated following formula. it is important to remember that overtime premium rate is usually expressed as % of basic rate.

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

Example

Basic rate of wages per hour= 6 $

Premium rate is 70% of the basic wage rate

How much overtime shall be paid for 10 hours?

Solution

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

 6 (1+ 70%)

= 10.2 $ per hour (Premium Rate)

Amount of overtime = Hr x overtime rate

= 10 x 10.2

=102 (Overtime for 10 hours)

Labour Hours Saved Formula

Labour Hours Saved Formula

Labour Hour saved can be calculated by the following formula. Labour save is basically difference between expected hour and actual hour taken by labour on an activity.

Hour Saved= Expected Hour > Actual Hour

Hour Saved = Expected Hour – Actual Hours

Example

Labour Hours required for Production of one unit= 6 Hour

Unit Produced=1000

Actual Hours taken by Labour Department = 5000

Calculate hour saved

Solution

Expected Hours = units x hour required per unit

=1000 x6

= 6000

Actual hours Spent or taken= 5000

Hour saved= Standard hours – actual hours

= 6000-5000

=1000 Hours Saved

Labour Capacity utilization Formula

Labour Capacity utilization Formula

Labour capacity utilization is calculated by dividing labour hours spent by the labour on job with total labour hours available.

Labour Capacity utilization Ratio =   Hour Spent by Labour   x 100

                                                  Total Available hour

Example

Total hour available = 1200

Hour worked = 950

Calculate Labour Capacity utilization?

Solution

Labour Capacity utilization Ratio =   Hour Spent by Labour   x 100

                                                      Total Available hour

=(950/1200) x 100

=79.16%

Labour Capacity utilization shows about resources utilization information.