ACCOUNTING FOR LABOR

Question 1

: Represents labor costs that are traceable to individual jobs or process worked on during the period [touch labor].

Answer 1

Direct Labor

Question 2

example of direct labor

Answer 2

wages of supervisor and workers directly engaged in theproduction.

Question 3

Costs are incurred for a variety of jobs that are related to the production process, but are not directly identifiable with the individual jobs worked and during the period.

Answer 3

indirect labor

Question 4

Indirect labor costs are charged to

Answer 4

manufacturing overhead costs or factory overheads

Question 5

is the difference between the time for which payment is made and the actual time worked.

Answer 5

Idle Time

Question 6

It is the time during which the worker did not engage himself in productive work

Answer 6

idle time

Question 7

Idle time may arise out of

Answer 7

normal or abnormal situations,

Question 8

normal idle time also known as

Answer 8

(unavoidable idle time)

Question 9

abnormal idle time also known as

Answer 9

(avoidable idle time).

Question 10

abnormal causes

Answer 10

• Failure of Power Supply
• Breakdown of Machinery
• Non-Availability of Material
• Strike
• Lock-out
• Natural Calamities

Question 11

normal causes

Answer 11

• Setting-up Time
• Movement from Gate to - Production Floor
• Movement from One Job to Another
• Time to Take Instruction
• Tea-Breaks
• Personal Needs
• Minor Accidents
• Seasonality of Industry

Question 12

is the extra compensation paid to an employee who works beyond the normal period of time

Answer 12

overtime

Question 13

is the additional rate an employee earns for working more than a regular daily shift [extra rate]

Answer 13

Overtime premium

Question 14

Normal causes ot

Answer 14

Charged to the concerned job or batch

Question 15

Abnormal causes ot

Answer 15

Transferred to costing profit and loss account

Question 16

causes of over-time

Answer 16

• Completion of a Rush Order
• Meeting a sudden spurt in demand
• Completion of a Delayed Work
• Making up for Loss of Production due to Accidents, Flood or Other Natural Calamities

Question 17

The excess paid over normal rate is called

Answer 17

Overtime premium.

Question 18

Wages are paid for the Time spent on the job

Answer 18

Time Rate

Question 18

Systems of Wage Payment

Answer 18

Time Rate
Piece Rate

Question 19

Rate per Hour. Per Day, or per Month

Answer 19

Time Rate

Question 19

Suitable when Quality of work is important

Answer 19

Time Rate

Question 20

Trade Unions prefer this method

Answer 20

Time Rate

Question 21

Monthly Payment goes with other allowances

Answer 21

Time Rate

Question 22

Advantages of Time Rate

Answer 22

• Simplicity
• Easier Computation
• Encourages Skill Development
• Guaranteed Wages
• Minimum Loss to Material and Equipmnets
• Equality of Wages
• Teamwork
• Cordial Relation among the Workers
• Support of Trade Unions

Question 23

Disadvantages of Time Rate System

Answer 23

- Abilities are not Differentiated - No Incentive for Hard Work - Requires Supervision - Dissatisfaction of Efficient Workers - Low Morale - No Punishment for Inefficiency - Labour Cost is not a variable cost under this system

Question 24

Calculation of Wages under Time Rate System Where : TT = Time Taken TR =Time Rate

Answer 24

Total Wages = TT X TR

Question 24

Output decides the wages payable

Answer 24

Piece Rate System

Question 24

Rate per unit of output

Answer 24

Piece Rate System

Question 24

standard time is taken, and the standard output is determined

Answer 24

Piece Rate System

Question 25

Advantages of Piece Rate System

Answer 25

- Efficiency is recognised ● Motivates the workers ● Reduces labour cost per unit ● Labour cost is variable ● Computation of labour cost in advance is easy ● Lesser Supervision ● Less Idle Time

Question 26

Disadvantages of Piece Rate System

Answer 26

● Quality suffers ● Difficulty of Fixing the standard output and Piece Rate ● More scrap and Defective Work ● Damage to Tools and Equipment ● No Guaranteed Wages ● Uncertainty in Income ● Trade Unions Oppose the System

Question 27

Determination of Piece Rate

Answer 27

Total Wages = Output X Piece Rate

Question 28

is responsible for making the payments to employees.

Answer 28

treasurer’s office

Question 29

sends the payroll record to the treasurer’s office.

Answer 29

Accounting department