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AAT - Management Accounting: costing > Costing for labour > Flashcards

Costing for labour Flashcards

1
Q

What must I learn from costing for labour?

A

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

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2
Q

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

A

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

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3
Q

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

A
  • Pay reviews & increases
  • need inclusion in forcast figures for costing products & setting budgets
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4
Q

What will normally affect pay increases ?

A
  • Cost of living - RPI
  • local & national employment conditions
  • profitbale & can afford pay increase
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5
Q

What must employers consider with pay/ payrises? P67

A
  • Balance:
  • employers motivated - profits are maximised & losses minimised
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6
Q

What are direct labour costs? P67

A
  • wages - directly attributed to unit of production / performance of service
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7
Q

What is the gorss costs of employment? - P67

A
  • Labour costs incurred
  • included in product/ service
  • before any deductuions
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8
Q

What are the clock cards? P67

A
  • Documents : starts and finishes work
  • usually - electro-mechanically by special clock
  • difference = numbers of hours worked
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9
Q

What are timesheets? - P67

A
  • time spent - employee
  • filled by employee & authorised by supervisor
  • completed daily, weekly, monthly
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10
Q

What is the job card or job sheet?

A
  • same as clock sheet & timesheets - but particular job
  • workers - own time
  • job finished = labour for job calculated
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11
Q

What are swipe cards?

A

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

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12
Q

What is signing in book ?

A
  • Sign a book - enter time entered and time left
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13
Q

What are the three ways of calculating gross pay?

A
  • Time rate ( basic rate plus overtime)
  • Piecework rate
  • Bonuses
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14
Q

What is time rate? P69

A
  • Employee pay : number of hours worked * hourly rate
  • hourly rate in employees contract
  • represents minimum pay - basic rate
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15
Q

What is overtime premium? P70

A
  • Additional pay above basic rate
  • employees - overtime hours
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16
Q

How are overtime rates expressed?

A

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

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17
Q

How can the overtime premiums be calculated?

A
  • 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
18
Q

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

A

indirect costs - not direct costs

19
Q

What is the piecework rate ? - P74

A
  • based on level of output
  • based - each task performed/ each unit produced
20
Q

What are the different tpyes of piecework schemes ?

A
  • Simple Piecework schemes
  • Differential piecework schemes
21
Q

What is a simple piecework scheme? P74

A

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

22
Q

What is differential piecework schemes? - P75

A
  • higher rate per unit - level of output reached
23
Q

How must simple piecework be approached ?

A
  • Piece work compared to guarenteed amount
  • highest gross wage is selected
  • Calculated weekly/ monthly
24
Q

What is the objective of differential piecework?

A

Higher productivity

25
Q

How is differential piecework calculated?

A

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

26
Q

What are bonuses? P77

A

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

27
Q

How may an employee be paid under the bonus scheme?

A

time worked + output acheived

28
Q

How is the bonus calculated p77

A
  • Basic rate :hours * pay per hour
  • Bonus : (amounf of units produced - minimum amount expected) * pay per extra unit
  • Total pay : basic rate + bonus rate
29
Q

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

A
  • 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
30
Q

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

A

yes
e.g. sales staff - comssion

31
Q

What is idle time ? - P80

A
  • Unable to work - no fault of their own
  • e.g. machine breakdown / insufficient materials for production
32
Q

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

A
  • basic rate
  • no production means labour costs = indirect labour costs/ overheads
33
Q

How does bookkeeping for labour costs work? P82

A
  • Same principle = material costs
  • linked - financial accounting system - payroll accounting system
  • wages control account
34
Q

What is the wages contro account ? P82

A

labour costs
include salaries & wages

35
Q

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

A
  • different sources
  • costing department - analysis of gross pay
  • payroll department - net wages paid/ amounts due to HMRC & pension contributions
36
Q

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

A

labour costs > various cost centres

37
Q

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

A
  • Debit - work in progress account
  • credit - wages control account
38
Q

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

A

Debit : production overhead account
credit: wages control account

39
Q

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

A
  • Debit : non production overheads account
  • credit : wages control account
40
Q

How will some organisations record entries for labour costs ? P83

A
  • Journal - before posting to indiviudal ledger accounts
41
Q

How would the charges into the costs ledger appear ? P83

A
  • Debit entries
  • expense accounts
  • credit entries - wages control account

AAT - Management Accounting: costing (10 decks)

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