p.8
Labour Ratios and Their Importance
What is another formula for calculating Production Volume?
Efficiency Ratio multiplied by Capacity Ratio.
What happens to profits arising from productivity improvements in bonus schemes?
They are shared between the employer and employee.
What negative effect can piecework schemes have on employees?
They may drive employees to work too hard to earn a satisfactory wage.
p.30
Recording Labour Costs
How is job time recorded?
Using daily/weekly time sheets or job cards.
p.6
Labour Ratios and Their Importance
How is the Labour Efficiency Ratio calculated?
Expected Hours to make (Actual) Output x 100 / Actual Hours worked.
p.36
Labour Ratios and Their Importance
How is the idle time ratio calculated?
Idle hours divided by total hours, multiplied by 100%.
p.48
Direct vs. Indirect Labour
What are the components of direct labour calculation for XYZ?
(420 x $20) + (280 x $30) + (100 x $40).
p.15
Labour Turnover and Its Implications
What are some controllable reasons for labour turnover?
Lower wages than available elsewhere, unsafe and stressful conditions, unfriendly working conditions, lack of opportunity for growth, and poor work relationships.
p.39
Recording Labour Costs
What is the purpose of analyzing labour costs?
To ensure accurate recording and management of labour expenses.
p.44
Direct vs. Indirect Labour
What is indirect labour?
Labour that is not traceable to production.
p.17
Labour Cost Control Strategies
How does classifying labour costs help in determining product costs?
It allows for accurate calculation of the total costs associated with producing a product.
What are the two different types of labour?
Direct Labour and Indirect Labour.
How does pay vary in piece work schemes?
Pay varies with output, such as the number of units produced in a day.
What is Piecework with Minimum Guarantee?
A payment method where an employee gets paid once they have produced a minimum amount.
p.40
Recording Labour Costs
How is gross pay analyzed in relation to labour costs?
It is analyzed between direct and indirect wages.
p.39
Recording Labour Costs
How should direct production wages be recorded?
Charge them to the appropriate job or operation.
p.39
Recording Labour Costs
What should be done with wages not directly attributable to production?
Charge them to overheads.
What are Piecework Schemes?
Output Related Payments based on the amount of work produced.
p.37
Recording Labour Costs
What is one of the main responsibilities of the Wages Department?
Preparation of payroll and payment of wages.
What should be clarified regarding the increased payment rates in differential piecework schemes?
Whether the increased rate will be paid on all units produced or only on the extra output.
p.7
Labour Ratios and Their Importance
What does the Labour Capacity Ratio measure?
The number of hours spent actively working as a percentage of the total hours available for work.
p.9
Labour Ratios and Their Importance
What is the formula for calculating production volume ratio?
Production Volume Ratio = (Actual Output / Budgeted Output) x 100.
p.9
Labour Ratios and Their Importance
What is the production volume ratio for the given example?
Production Volume Ratio = (27,000 / 25,000) x 100 = 108%.
p.7
Labour Ratios and Their Importance
What does the Labour Capacity Ratio reflect about employee utilization?
It reflects how many hours the employees utilized to get the job done.
p.38
Recording Labour Costs
What is the primary function of the Cost Accounting Department in relation to labour costs?
Accumulation and classification of all cost data.
What is typically guaranteed in piece work schemes?
A minimum wage to prevent loss of earnings during low production.
p.40
Recording Labour Costs
What is the function of the wages control account?
It acts as a 'collecting place' for net wages paid and deductions made from gross pay.
p.35
Recording Labour Costs
What methods can be used to record attendance time?
Signing-in book, clock card, and swipe card.
p.15
Labour Turnover and Its Implications
What impact do unsafe working conditions have on labour turnover?
They can lead to higher turnover as employees seek safer environments.
p.31
Recording Labour Costs
What is the purpose of cost accounting in labour cost management?
To analyze and control labour costs.
p.37
Recording Labour Costs
What does the Wages Department summarize regarding hours worked?
Summarizes hours worked for each cost centre.
p.37
Recording Labour Costs
What additional payments does the Wages Department summarize?
Bonus payments, pensions, etc.
p.47
Direct vs. Indirect Labour
What is the direct labour cost for ABC?
$17,000 (850 hours x $20).
p.41
Labour Cost Control Strategies
What is the purpose of the Wages Control Account?
To track and manage wages and related deductions.
How are employees compensated under bonus/incentive schemes?
Employees are paid more for efficiency.
What is the main characteristic of piece work schemes?
Payment to employees is linked to how much they produce.
p.38
Recording Labour Costs
What documents are used for recording labour costs?
Clock, job and idle time-cards, and payroll.
p.36
Labour Cost Control Strategies
What is the cost associated with idle time?
Basic wage paid for unproductive hours.
p.6
Labour Ratios and Their Importance
What does the Labour Efficiency Ratio indicate about a worker's performance?
The ability of the worker to do more work or better work during a given period.
p.35
Recording Labour Costs
What are the components of attendance time in recording labour costs?
Arrival, departure, and breaks.
p.48
Direct vs. Indirect Labour
Is overtime considered direct or indirect labour?
Direct labour, as it is done at the customers' request.
p.15
Labour Turnover and Its Implications
How can lower wages contribute to labour turnover?
Employees may leave for better-paying opportunities elsewhere.
p.5
Labour Ratios and Their Importance
What is Labour Production Volume?
A type of labour ratio that assesses the total output produced by staff members.
p.15
Labour Turnover and Its Implications
How does lack of opportunity for growth affect labour turnover?
It can cause employees to leave in search of better career advancement options.
p.7
Labour Ratios and Their Importance
What are budgeted hours in the context of Labour Capacity Ratio?
The total hours available for work.
p.14
Labour Turnover and Its Implications
How do you calculate the labour turnover rate?
Labour Turnover Rate = (Number of staff left / Average number of staff) x 100.
p.4
Labour Cost Control Strategies
What is the primary focus of labour cost control?
Improving productivity despite rising wage rates.
What is Straight Piecework?
A payment method where the more output an employee produces, the more they get paid.
What is a drawback of day rate systems for employees?
There is no incentive for employees to improve their performance.
p.48
Direct vs. Indirect Labour
What are the components of direct labour calculation for ABC?
(500 x $20) + (200 x $30) + (150 x $40).
p.10
Labour Ratios and Their Importance
How many expected hours are needed to make an actual output of 27,000 units?
108,000 hours (27,000 units x 4 hours).
p.17
Components of Labour Costs
What are the main components of labour costs?
Wages, salaries, and other incentives such as bonuses and overtime.
p.5
Labour Ratios and Their Importance
What does Labour Capacity or Utilization measure?
It measures the extent to which a company is using its available labour resources.
How do remuneration methods impact a company?
They affect the cost of finished products and services, as well as employee morale and efficiency.
p.37
Recording Labour Costs
How does the Wages Department summarize costs?
By summarizing wages cost for each cost centre.
p.45
Direct vs. Indirect Labour
When is Indirect Labour not applicable?
When all labour is direct, such as when done at the customer's request.
p.43
Components of Labour Costs
What does the employer's NIS refer to in the context of indirect labour?
National Insurance Scheme contributions for indirect workers.
p.14
Labour Turnover and Its Implications
What action did the HR department take after the excess staff left?
They replaced them with very skilled workers.
What is labour?
The combined effort of all human physical and mental energy used to create goods and services.
What is a benefit of day rate systems during revisions?
There are no complex negotiations.
p.30
Recording Labour Costs
What documentation is used for piecework?
Piecework ticket or operation card.
p.32
Recording Labour Costs
What classification is managed by the Personnel Department?
Classification and method of remuneration.
p.13
Labour Turnover and Its Implications
What is the formula for calculating labour turnover?
Replacement divided by Average Number of Employees, multiplied by 100.
What are the three main remuneration methods?
Time Work or Time-Based Payments, Piecework Schemes, Bonus/Incentive Schemes.
p.31
Recording Labour Costs
What is the role of production planning in labour cost control?
To ensure efficient use of labour resources.
p.9
Labour Ratios and Their Importance
What is the formula for calculating efficiency ratio?
Efficiency Ratio = (Actual Output / Standard Output) x 100.
p.9
Labour Ratios and Their Importance
What is the efficiency ratio for the given example?
Efficiency Ratio = (27,000 / 25,000) x 100 = 108%.
p.9
Labour Ratios and Their Importance
What is the formula for calculating capacity ratio?
Capacity Ratio = (Standard Hours for Actual Output / Actual Hours) x 100.
How is overtime pay calculated?
Basic rate plus a premium for additional hours worked.
p.45
Direct vs. Indirect Labour
What is the purpose of overtime in the context of labour?
To meet production requirements.
p.41
Components of Labour Costs
What does WIP stand for in the context of the Wages Control Account?
Work In Progress, referring to direct labour costs.
p.49
Components of Labour Costs
What is the overtime rate for weekend work at Marlton Shoe Company?
$60 per hour (double time).
What is Jim's gross wage calculation?
$20 * 100 + $22 * 92 = $2,000 + $2,024 = $4,024.
p.49
Components of Labour Costs
What is the total labour cost for the shoe?
$6,450 (normal + evening + weekend).
What do bonus/incentive schemes enable workers to do?
Increase earnings by working more efficiently.
p.3
Production vs. Productivity
How is productivity defined?
A measure of the efficiency with which output has been produced.
p.30
Recording Labour Costs
What is used to record labour attendance?
Attendance record or clock card.
p.16
Labour Turnover and Its Implications
What factors contribute to loss output in replacement costs?
Delay in new labour becoming available and increased wastage.
p.10
Labour Ratios and Their Importance
What is the formula to calculate budgeted hours to make one unit?
Budgeted hours ÷ Budgeted output.
What is a bonus/incentive scheme?
A payment made to employees based on above-average performance.
What does Time Work or Time-Based Payments refer to?
Compensation based on the amount of time worked.
p.45
Direct vs. Indirect Labour
What is the formula for calculating Direct Labour charged to a job?
Total Hours X Regular Rate.
p.42
Direct vs. Indirect Labour
What are direct labour costs?
Costs that can be traced in full to the product, service, or department being costed.
p.47
Direct vs. Indirect Labour
What is the indirect labour cost for XYZ?
$4,800 ((280 hours x $10) + (100 hours x $20)).
p.12
Labour Ratios and Their Importance
What is the efficiency ratio for Golden Delight Limited in August 2014?
Efficiency Ratio = (46,000 / 50,000) x 100 = 92%.
p.12
Labour Ratios and Their Importance
What is the production volume ratio for Golden Delight Limited in August 2014?
Production Volume Ratio = (46,000 / 50,000) x 100 = 92%.
p.2
Production vs. Productivity
What is the difference between production and productivity?
Production refers to the total output of goods or services, while productivity measures the efficiency of that output, typically expressed as output per unit of input.
p.38
Recording Labour Costs
What type of information is analyzed regarding labour?
Labour information on time-cards and payroll.
What do bonus/incentive schemes enable workers to do?
Increase earnings by working more efficiently.
How are employees compensated under bonus/incentive schemes?
Employees are paid more for efficiency.
What happens to profits arising from productivity improvements in bonus schemes?
They are shared between the employer and employee.
p.16
Labour Turnover and Its Implications
What measures can be taken to maintain good relationships with employees?
Personnel administration, welfare services, and pension schemes.
p.5
Labour Ratios and Their Importance
What are the three main types of labour ratio?
1) Labour Efficiency 2) Labour Capacity or Utilization 3) Labour Production Volume.
p.31
Recording Labour Costs
What function does timekeeping serve in relation to labour costs?
To track employee hours worked.
p.17
Components of Labour Costs
How do wages and salaries contribute to labour costs?
They constitute a very large component of labour costs.
p.42
Direct vs. Indirect Labour
What is included in the basic pay of direct workers?
The standard wages paid to workers directly involved in production.
What is a shift premium?
The extra amount paid over the basic hourly rate for work done during unsocial hours.
p.46
Components of Labour Costs
What is the overtime rate for weekend shifts?
Double the basic wage rate.
p.14
Labour Turnover and Its Implications
What is the average number of staff for calculating the turnover rate?
2,500 (initial staff) - 600 (average of 1,200 staff left) = 1,900.
p.11
Labour Ratios and Their Importance
How do efficiency and capacity ratios affect production volume?
Efficiency (90%) x Capacity (120%) = Production Volume (108%).
p.41
Components of Labour Costs
What does Idle Time refer to in the context of labour costs?
Time when employees are paid but not actively working.
p.3
Production vs. Productivity
What is production?
The quantity or volume of output produced.
p.3
Production vs. Productivity
What is the benefit of improved productivity?
It enables a company to achieve its production targets in fewer hours and at a lower cost.
p.16
Labour Turnover and Its Implications
What are replacement costs in labour turnover?
Costs incurred to hire new employees, including selection, replacement, training, and loss of output.
What is the purpose of differential piecework schemes?
To offer incentives to employees to increase their output by paying higher rates for increased levels of production.
How do bonus/incentive schemes affect employees under time-based systems?
They enable workers to increase earnings by working more efficiently.
p.5
Labour Ratios and Their Importance
What is Labour Efficiency?
A type of labour ratio that measures how effectively staff members are working.
What are Bonus/Incentive Schemes?
Compensation methods that provide additional pay based on performance or achieving specific goals.
p.43
Indirect vs. Direct Labour
What is a characteristic of indirect labour?
It cannot be traced in full to a product, service, or department.
p.45
Direct vs. Indirect Labour
What is the calculation for Direct Labour when overtime is involved?
(Regular Hours X Regular Rate) + (Overtime Hours X Overtime Rate).
p.42
Direct vs. Indirect Labour
What happens to the basic pay of direct workers when they work overtime?
It includes the basic pay component along with any overtime premium.
How is wages calculated?
Wages = hours worked x rate of pay per hour.
p.41
Components of Labour Costs
What does Overtime Premium refer to?
Additional pay for hours worked beyond regular hours.
p.8
Labour Ratios and Their Importance
How is Production Volume calculated?
Expected hours to make actual output multiplied by 100, divided by Hours Budgeted.
What is a characteristic of piecework schemes?
They enjoy fluctuating popularity.
p.38
Recording Labour Costs
What type of reports does the Cost Accounting Department prepare?
Cost data reports for management.
When are day rate systems most appropriate?
When quality of output is more important than quantity.
p.48
Direct vs. Indirect Labour
What is the formula for calculating direct labour charged to a job?
Direct labour = (regular hours x regular rate) + (overtime hours x overtime rate).
p.32
Recording Labour Costs
What type of records does the Personnel Department maintain?
Personnel record card, overtime, and shift working.
How does morale of employees change with bonus/incentive schemes?
Morale is likely to improve as they receive extra rewards for extra effort.
p.15
Labour Turnover and Its Implications
What are some unavoidable reasons for labour turnover?
Illness, family relocation, marriage, pregnancy, retirement, and deaths.
p.39
Recording Labour Costs
What type of reports should be produced regarding idle time?
Idle time reports that show cause and whether it is controllable or uncontrollable.
p.44
Direct vs. Indirect Labour
What is direct labour?
Labour that is traceable to production.
p.17
Labour Cost Control Strategies
What role does measuring labour efficiency play in labour cost classification?
It helps in assessing how effectively labour resources are utilized.
p.7
Labour Ratios and Their Importance
How is the Labour Capacity Ratio calculated?
Actual Hours worked x 100 / Hours Budgeted.
p.47
Direct vs. Indirect Labour
What is the formula for calculating direct labour?
Total hours x regular rate.
p.41
Components of Labour Costs
What does the Bank entry in the Wages Control Account represent?
Net wages paid to employees.
p.14
Labour Turnover and Its Implications
What is the calculated labour turnover rate for QD& Ace Limited?
48% (1,200 / 2,500 x 100).
p.12
Labour Ratios and Their Importance
How do you calculate the capacity ratio?
Capacity Ratio = (Budgeted Hours / Actual Hours) x 100.
p.12
Labour Ratios and Their Importance
How do you calculate the production volume ratio?
Production Volume Ratio = (Actual Output / Budgeted Output) x 100.
Why is labour considered important?
It is one of the most important elements of production.
p.4
Labour Cost Control Strategies
What does automation involve in the context of labour cost control?
The use or introduction of automatic equipment in a manufacturing or other process or facility.
p.36
Recording Labour Costs
What is the usefulness of timesheets in salaried labour?
They provide management information, serve as a basis for billing services, and support claims for overtime payments.
How is wages calculated in piece work schemes?
Wages = Units produced x rate of pay per unit.
What is Differential Piece Work?
A payment method where the more employees produce, the higher the rate per unit of output they receive.
p.13
Labour Turnover and Its Implications
How is the Average Number of Employees calculated?
(# at Beginning of Year + # at Year End) / 2.
What is one benefit of implementing bonus/incentive schemes?
They boost employee morale.
p.34
Recording Labour Costs
What is the purpose of weekly time sheets?
To summarize the time spent by each worker over the week.
p.34
Recording Labour Costs
What are job cards used for?
To record time spent by workers on specific jobs.
What is an overtime premium?
The extra rate per hour paid when an employee works more hours than the basic daily requirement.
p.43
Components of Labour Costs
What is an example of an overtime premium related to indirect labour?
Overtime premium paid to indirect workers.
p.11
Labour Ratios and Their Importance
What is the formula for calculating the efficiency ratio?
Efficiency ratio = Actual output / Budgeted output.
p.12
Labour Ratios and Their Importance
How do you calculate the efficiency ratio?
Efficiency Ratio = (Actual Output / Budgeted Output) x 100.
p.41
Components of Labour Costs
What is a Shift Allowance?
Additional compensation for employees working non-standard hours.
How do bonus/incentive schemes affect employee morale?
Morale is likely to improve as employees receive extra rewards for extra effort.
What is a key characteristic of day rate systems?
They are easy to understand.
p.6
Labour Ratios and Their Importance
What does a Labour Efficiency Ratio higher than 100% indicate?
The staff is working efficiently, producing more within the specified time.
p.32
Recording Labour Costs
What are the responsibilities of the Personnel Department in recording labour costs?
Engagement, transfer, and discharge of employees.
p.13
Labour Turnover and Its Implications
What is labour turnover?
Labour turnover measures the proportion of staff leaving in a period or the rate at which staff leave.
p.34
Recording Labour Costs
What is the primary function of the Timekeeping Department?
To record time spent in the factory by each worker.
p.34
Recording Labour Costs
What does the attendance record track?
Time spent by each worker on each job.
p.34
Recording Labour Costs
What are daily time sheets used for?
To record the time each worker spends on their tasks each day.
p.17
Labour Cost Control Strategies
Why is it important to classify labour costs?
To measure labour efficiency, determine accurate product costs, and prepare a labour cost control analysis.
What is Time Work or Time-Based Payments?
Workers are paid according to the hours they work, which can be hourly, weekly, monthly, or annually.
p.43
Components of Labour Costs
What is included in the basic pay of indirect workers?
The regular salary paid to workers who do not directly contribute to production.
p.44
Direct vs. Indirect Labour
What are some examples of direct labour costs?
Overtime, premium bonuses, sick pay, and idle time.
p.42
Direct vs. Indirect Labour
When is an overtime premium paid to direct workers?
When the overtime is worked at the specific request of the customer.
p.47
Direct vs. Indirect Labour
How is indirect labour calculated?
Overtime hours x overtime premium.
p.47
Direct vs. Indirect Labour
What is the indirect labour cost for ABC?
$5,000 ((200 hours x $10) + (150 hours x $20)).
p.11
Labour Ratios and Their Importance
What does the production volume ratio indicate?
It shows that more output than budgeted was made.
p.11
Labour Ratios and Their Importance
What does a capacity ratio above 100% indicate?
It indicates that the output exceeded the maximum capacity.
What is James' gross wage calculation?
$20 * 100 + $22 * 79 = $2,000 + $1,738 = $3,738.
p.6
Labour Ratios and Their Importance
What does the Labour Efficiency Ratio assess?
The productive capacity of a worker.
p.16
Labour Turnover and Its Implications
What are preventative costs in labour turnover?
Costs incurred to prevent employees from leaving, such as increased salaries and better working conditions.
p.5
Labour Ratios and Their Importance
What does the labour ratio focus on?
The different ways a company can examine how their staff members are working.
p.35
Recording Labour Costs
What is a challenge in recording job time for continuous production?
It is not practical to record precise details.
p.35
Recording Labour Costs
What are some methods for job costing?
Daily/weekly time sheets, job card, piecework ticket, and operation card.
p.45
Direct vs. Indirect Labour
How is Indirect Labour charged?
Overtime Hours X Overtime Premium.
p.9
Labour Ratios and Their Importance
What is the capacity ratio for the given example?
Capacity Ratio = (100,000 / 120,000) x 100 = 83.33%.
p.43
Components of Labour Costs
Can overtime premiums paid to direct workers be considered indirect labour costs?
Yes, if paid in the normal course of business.
p.37
Recording Labour Costs
What internal control does the Wages Department provide?
Internal check for preparation and pay-out of wages.
p.43
Components of Labour Costs
What is idle time in relation to indirect labour?
Time when workers are not productive but still being paid.
p.47
Direct vs. Indirect Labour
What is the direct labour cost for XYZ?
$16,000 (800 hours x $20).
p.11
Labour Ratios and Their Importance
What does an efficiency ratio below 100% indicate?
It indicates poor efficiency in production.
p.49
Components of Labour Costs
What is the total cost of the shoe before markup?
$8,950 (direct material + total labour cost).
p.7
Labour Ratios and Their Importance
What does a Labour Capacity Ratio higher than 100% indicate?
It means the staff is working longer and harder than initially anticipated.
p.42
Direct vs. Indirect Labour
What is the relationship between direct labour costs and prime cost?
Direct labour costs are part of the prime cost.
p.11
Labour Ratios and Their Importance
How is the capacity ratio calculated?
Capacity ratio = Actual output / Maximum capacity.
p.41
Components of Labour Costs
What does Production Overhead Control account for?
Indirect labour costs associated with production.
p.49
Components of Labour Costs
What is the total cost of normal labour for the shoe?
$3,000 (100 hours x $30).
p.47
Direct vs. Indirect Labour
Why is overtime used in labour?
To meet production requirements.
p.41
Components of Labour Costs
What does Sick Pay represent in the Wages Control Account?
Compensation paid to employees during their sick leave.
p.49
Components of Labour Costs
What is the overtime rate for evening work at Marlton Shoe Company?
$45 per hour (time and a half).
p.12
Labour Ratios and Their Importance
What is the capacity ratio for Golden Delight Limited in August 2014?
Capacity Ratio = (250,000 / 285,000) x 100 ≈ 87.72%.
p.49
Components of Labour Costs
What is the selling price of the shoe with a 25% markup?
$11,187.50 (total cost x 1.25).
p.41
Direct vs. Indirect Labour
What is included under Indirect Labour in the Wages Control Account?
Costs related to labour that is not directly tied to production.
What is John's gross wage calculation?
$20 * 100 + $22 * 50 + $25 * 50 + $35 * 107 = $2,000 + $1,100 + $1,250 + $3,745 = $9,095.
