Computation of earnings and analysis by direct and indirect categories

(a) Explain how the following cost items, relating to direct personnel, would be processed in a manufacturing business’s cost accounts:

(i) idle time; (3 marks)

(ii) overtime. (3 marks)

(b) The following information is available regarding the labour costs in a factory department for a week:

(ii) Group bonuses for the week, shared by all workers in the department, total £520.
(iii) The basic wage rates apply to a normal working week of 37 hours.
(iv) Overtime is worked in order to meet the general requirements of production.
(v) The idle time and the time spent training during the week are regarded as normal.
(vi) The expected number of payroll hours of direct personnel in the week (excluding time spent training), required to produce the output achieved, is 470.
Required:
(i) Calculate the total amounts paid in the week (before share of group bonus) to direct personnel and indirect personnel respectively.
(4 marks)
(ii) Determine the total amounts to be charged as direct wages and indirect wages respectively.
(5 marks)
(iii) Complete the Wages Control Account in the company’s separate cost accounting system, clearly indicating the account in which each corresponding entry woud be made.
(3 marks)
(iv) Calculate the efficiency ratio relating to the direct personnel (expressed as a percentage to one decimal place). (2 marks)
(Total 20 marks)
ACCA Management Information—Paper 3.LO1

Transcribed Image Text:

Payroll hours: Direct Indirect personnel personnel Production 432 117 Training 24 Idle time 32 4 Total 488 121 Rate per hour: Basic 7.50 6.00 Overtime premium 2.50 2.00 The following additional information is provided: (i) There are 12 direct personnel and 3 in- direct personnel in the department.