Labour Hours Saved 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).


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