Costing for labour

Question 1

What must I learn from costing for labour?

Answer 1

ARTIC
* Analyse costs info for labour
* Record costs info for labour
* Timesheet - completing them
* Identify the correct costs accounting journals for labour
* Calculate labour costs using time rate , piece rate, and bonsues

Question 2

What are the different factors determining pay rates for employees? - p66

Answer 2

PLAGAL N

Prevailing economic climate
Local living costs
Average wage rate - comparable jobs
Grants & incentives schemes
Availability of suitabily skilled workers
Local employment conditions

National minimum wage

Question 3

What will employees expect once pay rates have been set? - P66

Answer 3

• Pay reviews & increases
• need inclusion in forcast figures for costing products & setting budgets

Question 4

What will normally affect pay increases ?

Answer 4

• Cost of living - RPI
• local & national employment conditions
• profitbale & can afford pay increase

Question 5

What must employers consider with pay/ payrises? P67

Answer 5

• Balance:
• employers motivated - profits are maximised & losses minimised

Question 6

What are direct labour costs? P67

Answer 6

• wages - directly attributed to unit of production / performance of service

Question 7

What is the gorss costs of employment? - P67

Answer 7

• Labour costs incurred
• included in product/ service
• before any deductuions

Question 8

What are the clock cards? P67

Answer 8

• Documents : starts and finishes work
• usually - electro-mechanically by special clock
• difference = numbers of hours worked

Question 9

What are timesheets? - P67

Answer 9

• time spent - employee
• filled by employee & authorised by supervisor
• completed daily, weekly, monthly

Question 10

What is the job card or job sheet?

Answer 10

• same as clock sheet & timesheets - but particular job
• workers - own time
• job finished = labour for job calculated

Question 11

What are swipe cards?

Answer 11

Identity card - card reader
enter building to work
leave for breaks
time spent on jobs

Question 12

What is signing in book ?

Answer 12

• Sign a book - enter time entered and time left

Question 13

What are the three ways of calculating gross pay?

Answer 13

• Time rate ( basic rate plus overtime)
• Piecework rate
• Bonuses

Question 14

What is time rate? P69

Answer 14

• Employee pay : number of hours worked * hourly rate
• hourly rate in employees contract
• represents minimum pay - basic rate

Question 15

What is overtime premium? P70

Answer 15

• Additional pay above basic rate
• employees - overtime hours

Question 16

How are overtime rates expressed?

Answer 16

Time and a quarter = basic rate + 1/4 of basic rate
Time and a half = basic rate + 1/2 of basic rate
double time = Basic * 2

Question 17

How can the overtime premiums be calculated?

Answer 17

• time and quater : basic rate / 4 = premium+ basic = overtime pay OR basic rate * 1.25
• time and half : basic rate / 2 = premium + basic = overtime pay OR basic prate * 1.50
• Double rate : basic rate * 2 = overtime pay OR basic rate + basic rate

Question 18

Why would some organisations require the overtime premiums to be split out from basic rate? P73

Answer 18

indirect costs - not direct costs

Question 19

What is the piecework rate ? - P74

Answer 19

• based on level of output
• based - each task performed/ each unit produced

Question 20

What are the different tpyes of piecework schemes ?

Answer 20

• Simple Piecework schemes
• Differential piecework schemes

Question 21

What is a simple piecework scheme? P74

Answer 21

number of items produced - amount irrelevant
guarenteed minimum rate - not enough work

Question 22

What is differential piecework schemes? - P75

Answer 22

• higher rate per unit - level of output reached

Question 23

How must simple piecework be approached ?

Answer 23

• Piece work compared to guarenteed amount
• highest gross wage is selected
• Calculated weekly/ monthly

Question 24

What is the objective of differential piecework?

Answer 24

Higher productivity

Question 25

How is differential piecework calculated?

Answer 25

Method 1 : (1st level output * 1st level rate) + ( 2nd level output * 2nd level rate) method 2 : 1st & 2nd level output * 2nd level rate

Question 26

What are bonuses? P77

Answer 26

Department done well & output better than expected based on time saved - beneficial - value of time to employee

Question 27

How may an employee be paid under the bonus scheme?

Answer 27

time worked + output acheived

Question 28

How is the bonus calculated p77

Answer 28

* Basic rate :hours * pay per hour * Bonus : (amounf of units produced - minimum amount expected) * pay per extra unit * Total pay : basic rate + bonus rate

Question 29

How would you calculate: total labour costs per unit basic & overtime for each team member bonus earned by each team member

Answer 29

* total labour costs ( basic + overtime + bonus) / total number of units ( minimum units expected + extra units produced) * total overtime ( time and a half + time a quarter + double pay) / number of employeed * bonus / number of employees

Question 30

Can staff under indirect labour costs be eligible for bonus payment? P79

Answer 30

yes e.g. sales staff - comssion

Question 31

What is idle time ? - P80

Answer 31

* Unable to work - no fault of their own * e.g. machine breakdown / insufficient materials for production

Question 32

How would employees on piecework rate/ bonus scheme be paid during idle time? P80

Answer 32

* basic rate * no production means labour costs = indirect labour costs/ overheads

Question 33

How does bookkeeping for labour costs work? P82

Answer 33

* Same principle = material costs * linked - financial accounting system - payroll accounting system * wages control account

Question 34

What is the wages contro account ? P82

Answer 34

labour costs include salaries & wages

Question 35

Where would the information required for wages control accounts be gathered from ? P82

Answer 35

* different sources * costing department - analysis of gross pay * payroll department - net wages paid/ amounts due to HMRC & pension contributions

Question 36

What would the entries into the wages control account be used for ? P83

Answer 36

labour costs > various cost centres

Question 37

What would the double entry for direct labour costs charged to work in progress? P83

Answer 37

* Debit - work in progress account * credit - wages control account

Question 38

What would be the double entry for indirect labour costs charged to production overheads? P83

Answer 38

Debit : production overhead account credit: wages control account

Question 39

What would the double entry be for administration labour costs charged to non - production overheada? P83

Answer 39

* Debit : non production overheads account * credit : wages control account

Question 40

How will some organisations record entries for labour costs ? P83

Answer 40

* Journal - before posting to indiviudal ledger accounts

Question 41

How would the charges into the costs ledger appear ? P83

Answer 41

* Debit entries * expense accounts * credit entries - wages control account