Labour costs Flashcards
What are labour costs ? P83
Wages and salaries - all employees
What are the factors affecting labour costs ? P83
CHUNNI O
C - Business Confidence - interest charges
H - Housing and transport
U - High Unemployment - wage rates
N-** N** ational average wage rates comparison
N - National and living wages set by government
I - -Incentives from government - additional employees
O - Other local businesses
Who are direct labour costs paid to ? P83
- Production lien
- involved in assembly
- involved in an output of a service business
What are the three main methods of direct labour ? P84
- Time rate
- piecework rate
- bonus system
What is time rate ? P84
Time spent at work
overtime - beyond standard number of hours / days not in working week
What is piecework rate ? P84
- Agreed sum - each task / unit of output completed
- unit of outputs BASED ON agreed output per hour = standard hour produced
- Guaranteed minimum wage
What is the bonus system ? P84
Time rate + bonus
Output better than expected
compared - time allowed with time taken
calcualtion = agreed percentage of time saved * time rate
What is needed to calculate gross pay and how is this recorded ? P85
- Hours worked and/or work done
- time sheets
- clock cards
- piecework tickets
- job cards
- route card
- computer cards
When would a proportion of the labour cots ffor production line employees be classsed as indirect costs ? P89
- Wages - direct workers - not linked to specific work
When are the three times where the wages of production workeers woiuld be classec as indirect? P90
- Overtime payments and premiums
- Idle time
- equivalen units
How is overtime discerned in two ways ? P89
- Overtime payment - time rate + premium ( time and a half)
- overtime premium - the half bit
- accounting purposes - time rate is direct
- accounting purposes - OT premium indirect
When would overtime be classed as direct labour ? P89
Cost to customer
How would other additional pay be treated, such as bonus, be treated ? P89
Indirect labour
What is idle time and when does this happen? P90 and P31 mini booklet ?
Not egngaged- production work
no fault - machine breakdown , shortage of materials
How are employeees under a piecework and bonus system paid in idle tim ? P90
Time rate
What type of labour is idle time classed as? P90
Indirect labour
When would a calculation equivalent units be needed ? P90
- Production employees paid - output basis
- Part of production = work in progress ( end of accounting period)
- labour content
How do you calculate total equivalent units? P90
Units completed + (units work in progress * percentage completed) = equivalent units
What are the costs bookkeeping entries for labour costs concerned with ? P92
- Transfer of labour costs
- to production
- to overheads
What account is used to charge labour costs ? P92
- Wages control account
- linked - payroll accounting system
What responsibility centre does the wage control account charge labour costs to ? P92
- Costs
- profit
- investment centres
In what way is labour charged to various centres of a business ? P92
- Direct labour - production
- Indirect labour - production overheads
- Administration labour - non production overheads
What are production overheads also referred to as ? P93
- Operating overheadds
What are non production overheads also referred to as ? P93
Non- operating overheads
What is the double entry for transferring direct labour to production ? P93
Debit production
credit wages control
What is the general ledger entry for transferring indirect labour costs to production overheads ? P93
- Debit production overheads
- credit wages control account
What is the general ledger entry for transferring administration labour costs to non-production overheads ? P93
- Debit - non production overheads
- credit - wages control account
How do you account for labour costs relating to capital expenditure ? P93
- E.g. own workforce building extension to premise
- debit - premise account ( relevant capital expenditure)
- credit - wage control account
