Costing for labour Flashcards
What must I learn from costing for labour?
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
What are the different factors determining pay rates for employees? - p66
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
What will employees expect once pay rates have been set? - P66
- Pay reviews & increases
- need inclusion in forcast figures for costing products & setting budgets
What will normally affect pay increases ?
- Cost of living - RPI
- local & national employment conditions
- profitbale & can afford pay increase
What must employers consider with pay/ payrises? P67
- Balance:
- employers motivated - profits are maximised & losses minimised
What are direct labour costs? P67
- wages - directly attributed to unit of production / performance of service
What is the gorss costs of employment? - P67
- Labour costs incurred
- included in product/ service
- before any deductuions
What are the clock cards? P67
- Documents : starts and finishes work
- usually - electro-mechanically by special clock
- difference = numbers of hours worked
What are timesheets? - P67
- time spent - employee
- filled by employee & authorised by supervisor
- completed daily, weekly, monthly
What is the job card or job sheet?
- same as clock sheet & timesheets - but particular job
- workers - own time
- job finished = labour for job calculated
What are swipe cards?
Identity card - card reader
enter building to work
leave for breaks
time spent on jobs
What is signing in book ?
- Sign a book - enter time entered and time left
What are the three ways of calculating gross pay?
- Time rate ( basic rate plus overtime)
- Piecework rate
- Bonuses
What is time rate? P69
- Employee pay : number of hours worked * hourly rate
- hourly rate in employees contract
- represents minimum pay - basic rate
What is overtime premium? P70
- Additional pay above basic rate
- employees - overtime hours
How are overtime rates expressed?
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
How can the overtime premiums be calculated?
- 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
Why would some organisations require the overtime premiums to be split out from basic rate? P73
indirect costs - not direct costs
What is the piecework rate ? - P74
- based on level of output
- based - each task performed/ each unit produced
What are the different tpyes of piecework schemes ?
- Simple Piecework schemes
- Differential piecework schemes
What is a simple piecework scheme? P74
number of items produced - amount irrelevant
guarenteed minimum rate - not enough work
What is differential piecework schemes? - P75
- higher rate per unit - level of output reached
How must simple piecework be approached ?
- Piece work compared to guarenteed amount
- highest gross wage is selected
- Calculated weekly/ monthly
What is the objective of differential piecework?
Higher productivity
How is differential piecework calculated?
Method 1 : (1st level output * 1st level rate) + ( 2nd level output * 2nd level rate)
method 2 : 1st & 2nd level output * 2nd level rate
What are bonuses? P77
Department done well & output better than expected
based on time saved - beneficial - value of time to employee
How may an employee be paid under the bonus scheme?
time worked + output acheived
How is the bonus calculated p77
- Basic rate :hours * pay per hour
- Bonus : (amounf of units produced - minimum amount expected) * pay per extra unit
- Total pay : basic rate + bonus rate
How would you calculate:
total labour costs per unit
basic & overtime for each team member
bonus earned by each team member
- 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
Can staff under indirect labour costs be eligible for bonus payment? P79
yes
e.g. sales staff - comssion
What is idle time ? - P80
- Unable to work - no fault of their own
- e.g. machine breakdown / insufficient materials for production
How would employees on piecework rate/ bonus scheme be paid during idle time? P80
- basic rate
- no production means labour costs = indirect labour costs/ overheads
How does bookkeeping for labour costs work? P82
- Same principle = material costs
- linked - financial accounting system - payroll accounting system
- wages control account
What is the wages contro account ? P82
labour costs
include salaries & wages
Where would the information required for wages control accounts be gathered from ? P82
- different sources
- costing department - analysis of gross pay
- payroll department - net wages paid/ amounts due to HMRC & pension contributions
What would the entries into the wages control account be used for ? P83
labour costs > various cost centres
What would the double entry for direct labour costs charged to work in progress? P83
- Debit - work in progress account
- credit - wages control account
What would be the double entry for indirect labour costs charged to production overheads? P83
Debit : production overhead account
credit: wages control account
What would the double entry be for administration labour costs charged to non - production overheada? P83
- Debit : non production overheads account
- credit : wages control account
How will some organisations record entries for labour costs ? P83
- Journal - before posting to indiviudal ledger accounts
How would the charges into the costs ledger appear ? P83
- Debit entries
- expense accounts
- credit entries - wages control account
