This is probably one of the most misunderstood calculations of all and is therefore worthy of your full consideration.
Most
people are of the assumption that the Labour Gross Profit is Labour
Sales minus Hours Attended. If this were to be the case then Idle Time
would be reported at zero.
The true calculation is the monetary value of the Hours Sold minus the monetary value of the Hours Worked productively.
Example:
A) Labour Sales (hours sold) = R42,240 B) Hours Worked Productively = R7,803 C) Labour Gross Profit = R34,437 (A - B)
Discussion:
It
is important to note here that the Labour Cost of Sales is only the
value of the hours spent working productively on the hours that have
been sold. You can deduce from this calculation that the Productives
time is split between hours worked productively and Idle Time.
