Accounting for Labour Flashcards
(24 cards)
What are the three basic remuneration policies organisations might have?
- time work
- piecework schemes
- bonus/incentive schemes
Time Work remuneration policy
- wages determined by number of hours worked
- if works more than basic hours, overtime payment made at premium rate
- easy to understand
- not lead to negotiations
- appropriate when quality more important than quantity
- no incentive to improve performance
Piecework scheme remuneration policy
- wages calculated on number of units produced
- norm guaranteed minimum wage
piecework time allocated to each unit, then times hourly piecework rate
- drive employees
- inspection of output is necessary to ensure quality doesn’t fall
Bonus/Incentive Scheme remuneration policy
- compensate/incentivise workers paid under time based system
High day rate- paid higher with expectation work more efficiently
Individual Bonus- calculated separately, reflects efficiency
Group Bonus - calculated on group performance, less effort to measure, increase co-op, cause friction
Production definition
quantity/volume of output produced
Productivity Definition
measure of efficiency with which output has been produced
Standard hour of production
concept used in standard costing
- number of units that can be produced by one worker, working in standard way, at standard rate for one hour
Standard Labour Hours=
= actual units of output x standard time per unit
Efficiency Ratio =
= expected hours to make output/ actual hours taken
Capacity Ratio =
= actual hours worked/ hours budgeted
Production Volume Ratio =
= expected hours to make output/ hours budgeted
= efficiency ratio x capacity ratio
Labour turnover definition
measures number of employees leaving/being recruited in period of time
- expressed as percentage of total labour forces
- ideally as low as possible
Labour Turnover Rate =
= replacements/ average number of employees in period x 100
What are the controllable reasons for labour turnover?
- demotivated staff
- work not interesting/challenging
- not rewarded
- staff leaving for competitor
What are uncontrollable reasons for labour turnover?
- recruit staff as trainees, so once qualified have more options
- retirement
- illness
- staff moving away
What are the replacement costs of labour turnover?
- cost of selection/placement
- inefficiency of new labour (learning)
- training
- timing with starting
What are the preventative costs of labour turnover?
- maintain good relationships
- costs of welfare- sports facilities, social events
- employee benefits
What types of pay are costed as direct labour?
- basic pay and basic element of production overtime for direct workers
- both elements of specific overtime @ customers request for direct/ indirect workers
What types of pay are costed as indirect costs?
All pay of indirect workers except specific overtime @ customers request
- premium element of production overtime for direct workers
- both elements of non-production overtime for direct workers
What are labour records required for?
- allocating labour costs to jobs
- splitting into direct/indirect
- invoicing customers
- ensure accurate pay
What can labour records include?
attendance time records
- clock in/out
- absent days due to holiday/sickness
Job Time Records
- time on individual jobs
- good for repair services
Time Sheets
- allows for billing to clients
- overtime record
- accounting & law
What is the double entry for gross wages paid to employees?
Dr wages control account ( may be split between net pay & deductions)
Cr Bank - net pay
Cr deduction control accounts- NI, Tax
What is the double entry for moving direct labour costs from wages to direct cost?
Dr Work in Progress account
Cr Wages Control account
What is the double entry to move indirect labour from wages to indirect costs?
Dr production overhead account
Cr wages control account
