Chapter 18 | Labor Cost Considerations

Question 1

What is the goal of labor cost control?

Answer 1

To improve efficiency or productivity

Question 2

What are the three payroll expenses

Answer 2

Direct current compensations
Benefits
Payroll taxes

Question 3

What are the types of compensation?

Answer 3

Direct current compensation: salaries/wages/tips/etc
Indirect currect compensation: paid vacations/health benefits/life insurance/etc
Deferred compensation: pension/social security

Question 4

What are the two types of payroll deduction?

Answer 4

Mandatory: FICA, Federal income tax, State/City income tax
Voluntary: insurance, charity, union dues

Question 5

How do you increase productivity?

Answer 5

Make people able to do more

Make people want to do more

Question 6

What is the equation to determine breakeven for hours of operation?

Answer 6

Breakeven = Fixed cost / (1 - variable rate)

Question 7

Conditions to receive tips and meal credits?

Answer 7

Tips are regularly received
Tips are equal to or greater than the tip credit
Customers have unrestricted right to determine the amount and to whom

Question 8

What is the IRS’s rule on automatic tips?

Answer 8

Automatic gratuities are classified as service charges

Question 9

What is the implication of the new IRS rule?

Answer 9

Inclusion of tips complicate payroll accounting because of hourly pay rates
Tax burdens are higher for everybody
Employees also like tips at end of shift

Question 10

What are the costs of layoffs?

Answer 10

Rehiring and training 
Morale among employees
Leadership - not enough
Brand equity as an employer
Wall street - stock might tank