DETERMINATION OP EFFICIENCIES 317
Efficiency of direct labor;
Efficiency of direct materials; and
Efficiency of overhead expense
324. Any one of these three efficiencies is the product
of four factors:
Efficiency of use;
Efficiency of supply;,
Efficiency of price; and
Efficiency of distribution.
325. These four factors of efficiency are defined as
follows:
Efficiency of Use is the quotient obtained by dividing
actual result obtained by the use of anything, by what
ought to have been obtained—that is, by the standard
result. If a workman in one hour produces seventy
pieces when the standard result is one hundred, the
efficiency of use of his labor is seventy per cent. It
is more convenient usually to express this efficiency
for labor in terms of standard and of actual time. In
the example given, the standard time for producing
one hundred pieces would be one hour, while the actual
time required would be 1.43 hours. The efficiency
would then be standard time divided by actual time, or
1. — 1.43=70 per cent.
Efficiency of Supply is the quotient obtained by dividing
the amount of anything which would be necessary
for any purpose (that is the standard amount)
by the amount actually so provided. If one hundred
men are employed, where only ninety-five are needed,
the efficiency of supply of labor is 95-f-100=95 per
cent.
Efficiency of Price is the quotient obtained by dividing
what ought to be paid for anything (that is the
standard price) by what is actually paid for it. If the