TUTORIAL SHEET GENERAL 1 Review all lecture questions on lecture sheet 2 What are the responsibilities of the personnel, wages/payroll and costing departments? 3 What is a clock card? 4 What is an operation card? 15 Are overtime and shift premiums normally included in direct wages? 6 Give some examples of reports, which might assist labour cost control. Which of the following labour records may be used to allocate costs to the various cost units in a factory? (i) Employee record card (ii) Attendance record card (iii) Time sheet (iv) Job card A (i) and (ii) B (i), (iii) and (iv) C (ii) and (iii) D (iii) and (iv) Which of the following are aspects of payroll systems? (i) Attendance records (ii) Calculation of bonuses (iii) Employee tax codes (iv) Apportionment of wages to cost centres A (i), (ii) and (iii) only B (ii), (iii) and (iv) only C (i), (ii) and (iv) only D All four items LABOUR TURNOVER 9 What is the labour turnover ratio? 10 The following statement is an extract from an article about an electronics and telecommunications company. "Turnover for the entire labour force is now stabilized at 23% per annum, consisting of 4% for management, 30% for hourly paid workers, one third of whom are women" (a) Explain what is meant by "labour turnover" (b) What are some of the reasons for a high labour turnover ratio (c) List five (5) cost implications of a high labour turnover ratio 11 X Ltd has an average of 42 workers employed in one of its factories in a period during which seven workers who left were replaced. Calculate the labour turnover percentage for the period. 12 The labour turnover of B Ltd. has risen disturbingly and for the last six 4-weekly periods the figures are given below. State the further information desirable for the following tabulation to be more useful as a basis for managerial action. Period Average No. Employed Turnover 1.000 60 2 1,200 120 3 1,100 100 4 1.000 100 5 1,000 100 1,000 130 13 Mona Ltd. had a staff numbering 1,600 at the beginning of 2003 and 2,400 at the end of that year. 800 employees resigned on June 30, 2003 and were immediately replaced by 800 new employees on July 20, 2003, 800 new employees were also recruited at that time. Calculate the labour turnover rate.company. \"Turnover for the entire labour force is now stabilized at 23% per annum, consisting of 4% for management, 30% for hourly paid workers, one third of whom are women\" (a) Explain what is meant by \"labour turnover" 0)) What are some of the reasons for a high labour turnover ratio (6) List ve (5} cost implications of a high labour turnover ratio ll X Ltd has an average of 42 workers employed in one of its factories in a period during which seven workers who left were replaced. i The following statement is an extract from an article about an electronics and telecommunications I Calculate the labour turnover percentage for the period. below. State the further information desirable for the following tabulation to be more useful as a basis for managerial action. Average No. Employed The labour turnover of E Ltd. has risen disturbingly and for the last six 4-weekly periods the gures are given employees resigned on June 30, 2003 and were immediately replaced by 800 new employees on July 20, 2003, 800 new employees were also recruited at that time. Calculate the labour turnover rate. 1 Mona Ltd. had a staff numbering 1.600 at the beginning of 2003 and 2,400 at the end of that year. 800 series of redundancies caused by recession, 1,000 at the end of the year. Voluntary redundancy was taken by 1,500 staff at the end of June 2008. This was 500 more than the company had anticipated, and these excess redundancies were replaced a week later by new 14 Manchester Producers Ltd. had a staff of 2.000 at the beginning of 2008 and. owing to a workers. Calculate the labour turnover rate. concerns. The company was only able to nd 120 persons who were willing to occupy the jobs vacated by the 15 During September 2003 approximately 300 persons retired from a factory located in Kingston, due to security former employees. The average number of workers during the period was 1,000. What is the turnover ratio? B. Step cost C. Training cost 16 Which of the following is a cost of labour turnover? A. Marginal cost D. Opportunity cost B. Discharge C. Lack of career structure D. Increase in salary Cost relating to labour turnover may be classied as: (i) replacement costs (ii) preventative costs Rguired: Dene both replacement and preventative costs giving TWO examples of each, and state a formula used to calculate the rate of labour turnover. (6 marks) 13 The directors of Golden Beach Resort Ltd are concerned about its labour turnover rate, especially aer a director heard employees talking about how "badly the company treated them". 17 Wl'tieh of the following is n_ot a typical reason for labour turnover? A. Change in domestic circumstances. Below is the turnover rate for three similar players in the hotel industry for the year ended 31 December 2004: Slippels Beach Resort Supreme Clubs Resort Ritz Sultan Resorts The following data concerns the labour force of Golden Beach Resorts: Employees at January 1, 2004 1200 Employees at December 3 l , 2004 900 Workers who resigned during the year 300 D. Opportunity cost 17 Which of the following is not a typical reason for labour turnover? A. Change in domestic circumstances. B. Discharge C. Lack of career structure D. Increase in salary Cost relating to labour turnover may be classified as: (i) replacement costs (ii) preventative costs Required: Define both replacement and preventative costs giving TWO examples of each, and state a formula used to calculate the rate of labour turnover. (6 marks) 18 The directors of Golden Beach Resort Lid are concerned about its labour turnover rate, especially after a director heard employees talking about how "badly the company treated them" Below is the turnover rate for three similar players in the hotel industry for the year ended 31 December 2004: Slippers Beach Resort Supreme Clubs Resort Ritz Sultan Resorts 5% 6% 4% The following data concerns the labour force of Golden Beach Resorts: Employees at January 1, 2004 1200 Employees at December 31, 2004 900 Workers who resigned during the year 300 Workers hired during the year 260 (i) Calculate the labour turnover rate for Golden Beach Resort. (2 marks) (ii) Is the concern of the directors of Golden Beach Resorts justified? Explain (2 marks) (iii) Write a memo to the directors of Golden Beach Resorts advising them of how to proceed in correcting their labour turnover problem, making specific references to preventative and replacement costs. (6 marks) LABOUR RATIOS 19 Silverstone Ltd. Budgets to make 25,000 standard units of output during a budget period of 125,000 hours. Actual output during the period amounted to 30,000 units, which took 145,000 hours to produce. (a) What is the efficiency ratio? (b) What is the capacity ratio? (c) What is the production volume ratio? 20 A company manufactures a single product at the rate of 25 units per direct labour hour. 660 direct labour hours were budgeted to be worked in a period during which 640 hours were actually worked and 16,390 units were manufactured. Required: Calculate the following ratios for the period: (i) efficiency (3 marks) (ii) capacity (3 marks) (iii) production volume (3 marks) 21 Basco Ltd is a manufacturing company which produces brown sugar. The company planned to produce 60,000 kilograms of brown sugar in 1500 hours. For the period ended 31 March 2005, the company produced 90,000 kilograms in 2200 hours. (i) Calculate the labour efficiency ratio (2 marks) (ii) Calculate the capacity ratio (2 marks) (iii) Explain what is revealed by both ratios. (2 marks 22 The direct labour capacity ratio for a period was 104%. What could have caused this? A Actual hours worked(iii) production volume (3 marks) 60,000 kilograms of brown sugar in 1500 hours. For the period ended 31 March 2005, the company produced 90,000 kilograms in 2200 hours. (i) Calculate the labour efciency ratio (2 marks) (ii) Calculate the capacity ratio (2 marks} iii Ex lain what is revealed b both ratios. (2 marks P Y Basco Ltd is a manufacturing company which produces brown sugar. The company planned to produce A Actual hours worked being greater than budgeted hours B Actual hours worked being less than budgeted hours C Standard lime for actual output being greater than budgeted hours 22 The direct labour capacity ratio for a period was 104%. What could have caused this? D Standard time for actual output being less than budgeted hours LABOUR REMUNEMTION (b) For each category identied above, provide some examples of their implementation and 23 (a) Briey outline the features of the three major categories of labour remuneration. critically assess their strengths and weaknesses 24 A worker is paid by differential piecework as follows: Up to 300 units$0.40 per unit 30] - 500 units $0.45 per unit 501 800 units $0.43 per unit 801 and above $0.50 per unit In a particular week. 596 units were produced, of which 22 were rejected. What were the worker's wages for the week? 25 A differential piecework scheme has a basic rate of $050 per unit. Output in addition to 500 units is paid at higher rates. The premiums over and above the basic rate, which apply only to additional units over the previous threshold, are: Output (units) Premium {per unit) 501600 $005 above 600 $010 What is the total amount paid if output is 620 units? A $3 17 B 15318 C $322 D $372 26 Amalgamated Ltd is a manufacturer of a product used in the motor industry. The product is assembled from various pans and the production operatives are paid on a piecework basis. The piece work scheme to be applied to all good production in a week is as follows: 0- l00 units: $0.40 per unit 101 7 200 units $0.48 per unit 201 7 300 units $0.56 per unit Over 300 units $0.64 per unit Rejected production does not qualify for payment. It should be noted that only additional units qualify for the higher rates The following output was achieved by three operatives during the week ending 3] October 2005. Operative A B C Output (including rejects) 520 units 600 units 430 units Rejects 19 units 62. units 10 units Rguired: (3) Calculate separately the earnings of each of operatives A, B and C for the week ending 31 October 2005. (9 marks} (1)) What are two advantages to an employer if they use a piecework scheme? (2 marks) (0) What is one disadvantage to an employer if they use a piecework scheme? (1 mark) 27 ABC company runs a 35 hour week and pays a basic rate of $2.00 per hour. The company has a high day rate scheme in which the standard level of output is xed at 45 garments and the high day late is xed at $2.20. During one week an employee works 35 hours and produced 40 garments. What is his total salary for that week? Over 300 units $0.64 per unit Rejected production does not qualify for payment. It should be noted that only additional units qualify for the higher rates The following output was achieved by three operatives during the week ending 31 October 2005. Operative A B C Output (including rejects) 520 units 600 units 480 units Rejects 19 units 62 units 10 units Required: (a) Calculate separately the earnings of each of operatives A, B and C for the week ending 31 October 2005. (9 marks) (b) What are two advantages to an employer if they use a piecework scheme? (2 marks) (c) What is one disadvantage to an employer if they use a piecework scheme? (1 mark) 27 ABC company runs a 35 hour week and pays a basic rate of $2.00 per hour. The company has a high day rate scheme in which the standard level of output is fixed at 45 garments and the high day rate is fixed at $2.20. During one week an employee works 35 hours and produced 40 garments. What is his total salary for that week? 28 D Limited has two employees, John and Wayne, making product E. During one week, both employees worked for 40 hours. John's rate of pay was $3.20 per hour and he produced 180 units of E. Wayne's rate of pay was $2.75 per hour and he produced 150 units. The budgeted time allowed to complete one unit of E is 15 minutes. Each employee is guaranteed a minimum wage based on his respective hourly rate. (a) Calculate the gross wage for the two employees if payment is determined on a day worked basis? (b) Calculate the gross wage for the two employees if payment is determined on a piecework basis at rate of $0.72 per unit? (c) What is the gross wage for the two employees if a bonus is paid at $2.40 for each hour saved? 29 A company pays a basic rate of $4.60 per hour to all its direct personnel. This is used as the standard rate. In addition, a factory wide bonus scheme is in operation. A bonus of half of the efficiency ratio in excess of 100% is added as a percentage to the basic hourly rate e.g. If the efficiency ratio is 110% then the hourly rate is $4.83 [i.e. $4.60 + ($4.60 x 5%)] During the period 114,268 units of the company's single product were manufactured in 4,900 hours. The standard hour is 22 units. Required: Calculate the hourly wage rate paid for the period. 30 Based on the data shown below, you are required to calculate the remuneration of each employee, as determined by each of the following methods: Part A (i) hourly rate (ii) basic piece pay (iii) individual bonus scheme, where the employee receives a bonus based on 60% of the time saved. Data Name of Employee Salmon Roach Pike Units produced 270 220 220 Time allowed in minutes per unit 10 15 12 Time taken in hours 40 38 36 $ $ $ Rate per hour 1.25 1.05 1.20 Rate per unit 0.20 0.25 0.24 PART B. Comment briefly on the effectiveness of method (iii). 31 An item passes through five successive hand operations in sequence as follows: Operation Time per arere ge rate perPART B. Comment briey on the effectiveness of method (iii). An item passes through five successive hand operations in sequence as follows: Operation Time per article Grade of Wage rate per (minutes) employee hour 12 $0. 50 20 $0. 55 30 $0. 60 10 $0. 70 15 $0. 80 A 36 hour week 1s worked and a production target of 720 dozen items has been set. You are required to calculate. (a) the lots? number of workers required (b) the weekly cost of each operation (C) the totai labour cost for a week. than Roach who 15 to be paid twice as much as Pike. How much should each worker receive? 3Mary' s wages for January was obtained from regular pay, overtime pay and a bonus payment. Her regular pay for January amounted to 40% of her total wages. Of the remainder, 75% was obtained for working overtime. The remaining $1800 represents the bonus payment. How much was her total wages for January? A company pays direct operatives a basic wage of $8 50 per hour plus a productivity bonus. The bonus is calculated as. [(time allowed time taken) x (basic rate per hour+ 3)] The time allowed 15 2 4 minutes per unit of output. An operative produced 1,065 units in a 37. 50 hour week. What were the total eamings of the operative in the week? A $3 18- 75 B 1333- 20 C .1540- 40 D 5362- 10 35 Ajob cost estimate includes 630 productive labour hours. In addition, it is anticipated that idle time will be 10% of the total hours paid for the job. The wage rate is $12 per hour. A company has decided to pay bonus totaling $2, 700 to its three workers. Salmon is to be paid $200 more What' is the total estimated labour cost for the job? A $6, 804 B 37, 560 C $8, 316 D $8, 400 ACCOUNTING FOR LABOUR 6 A rm a basic rate is $3 per hour and overtime rates are time and a half for evenings and double for weekends. The following details have been recorded on three jobs. Job X321 Job X736 Job X114 Clock Hours Clock Hours Clock Hours Normal time 480 220 150 Evening time 102 60 80 Weekend 10 3t] 16 You are required to calculate the labour cost chargeable to each job in the following circumstances: it) Where overtime is worked occasionally to meet production requirements. b) Where overtime is worked at the customer's request to bring forward the delivery time. (3) Write the journal entries to account for direct wages and indirect wages 3? Analysis of the groSs wages in a factory reveals the following: - Normal hours worked at basic rate 36,260 . Overtime premium Direct operatives (Xi) I (we b) Where overtime is worked at the customer's request to bring toward the delivery time. c) Write the journal entries to account for direct wages and indirect wages 3? Analysis of the groSs wages in a factory reveals the following: - - 1,028 Overtime working is a usual aspect of running the business. What amount wouid be recorded as a direct cost'.J A $3 6,260 B $40,372 C $41,400 D $41,840 Debit Credit A Cost of sales Finished goods B Finished goods Wotk-in-progress C Finished goods Cost of sales D Workriniprogress Finished goods When production has been completed what double-entry would be made in a cost accounting system? 39 Labour costs may include: (i) overtime hours of direct operatives at basic rate (ii) overtime premiums of factory employees (iii) productive time of direct operatives (iv) training of direct operatives Which of the above items will usually be treated as a direct cost? A (i) and (ii) B (i) and (iii) C (ii) and (iv) D (i), (iii) and (iv) 40 The following items are some of the costs incurred by a company: (i) training of direct operatives (ii) wages of distribution staff (iii) normal idle time in the factory (iv) productive time of direct operatives (v) sales personnel salaries Which of the above items will usually be treated as production overhead costs? A (i) and (ii) only B (i) and (iii) only C (i), (iii) and (iv) only D (ii), (iv) and (v) only 41 Analysis of the gross wages in a factory reveals: Direct operatives ($ Indirect operatives (5 Productive hours at basic rate 41,200 17,600 Overtime Premium 450 7'60 Group bonuses Total gross pay What amount would NORMALLY be accounted for as production overhead? A $18,050 B $18,810 C $21,590 D $22,690