How to calculate Efficiency

The efficiency is the comparison of the output to the input of a given operation. This means that what is the ratio between the given output and the input of a certain operation. The comparison of the output and the input can be done between time, effort and capacity including many other tangible items. A high level of efficiency shows that a less amount of time, capacity, money, labor or effort is used to generate more results. The formula of work efficiency can be shown as under:-

Work Efficiency = Work Output/Work Input x 100

Here the output is considered as the work output that indicates hundred percent works eliminating all the scarp, spoilage and other kind of wastes. The formula of efficiency can be used in a number of manners to find out the efficiency of motors, equipment, energy utilization and things like these. The major usage of formula of efficiency is in cost accounting in order to calculate labor efficiency variance and variable overhead efficiency variance. Where labor efficiency variance can be defined as the difference between the actual working hours and the standard working hours and on the other hand variable overhead efficiency variance can be defined as the difference between the actual and the standard working hours multiplied by the total overhead rate.

Other Related Accounting Articles:

• Standard Costing and Variance Analysis Formulas
• What is an Inventory Change?
• Expense Ratio
• Depreciation: Straight Line Biases
• The Present Value Factor
• Price Earnings Ratio (PE Ratio)