Unit 4 | Cost Accounting | 2 Marks Q&A

 

UNIT - IV

PART - A (THEORY)

1. What do you mean by labour cost?

Labour is very important part of production. Its cost is very important in total cost of production. Labour cost means all amount given to labourers or employees for his work for production. In labour cost we include two type cost relating to labour - Monetary cost of labour and Non monetary labour cost.

2. Define idle time.

Idle time is unproductive time on the part of employees or machines as a result of factors beyond their control. Idle time is the time associated with waiting, or when a piece of machinery is not being used but could be

3. What is piece rate system?

The piece rate system is that system of wage payment in which the workers are paid on the basis of the units of output produced. Piece rate system does not consider the time spent by the workers. Piece rate system is the method of remunerating the workers according to the number of unit produced or job completed. It is also known as payment by result or output.

4. What is labour cost?

The payment made to the labour in exchange for its service is called labour cost, which constitutes a major part of the total cost of production. Labour cost is also commonly called wages. Labour cost or wages is one of the major elements of cost. Labour cost represents the expense incurred on both direct and indirect labour. However, labour cost is more than just wage as it includes the total amount of financial benefits given by the concern to all its workers and employees for their time and effort used in producing goods and services.

5. What is labour turnover?

Labour turnover may be defined as change in labour force. (% change in labour force during a specific period). High labour turnover indicates that the labour is not stabilised and there are frequent changes by way of workers leaving the organisation.

6. Explain direct labour.

Direct labour is production or services labour that is assigned to a specific product, cost center, or work order. When a business manufactures products, direct labour is considered to be the labour of the production crew that produces goods, such as machine operators, assembly line operators, painters, and so forth. When a business provides services, direct labour is considered to be the labour of those people who provide services directly to customers, such as consultants and lawyers. Generally, a person who is charging billable time to a customer is working direct labour hours.

7. What is time booking?

Time booking is recording the time actually spent by a worker on various jobs done by him in the factory for cost analysis and dividing labour cost into various jobs and departments. It also helps in control over wastage of time- idle time

Different methods used for time booking are:

Daily Time Sheets

Weekly Time Sheets

Job Cards

8. What is Labour Turnover ratio?

Labour Turnover ratio is a calculation of the number of employees who have left the company and it is expressed as a percentage of the total number of employees. Although turnover rate is usually calculated and reported as a percentage per year it can be for different periods.

9. Give any two methods of remuneration.

Time Rate system

Piece Rate system

10. Give any two advantages of "Merit rating".

Systematic evaluation of employees Facilitates promotion related decisions

11. What is Time wage system?

The time rate system is that system of wage payment in which the workers are paid on the basis of time spent by them in the factory. Under this system, the workers and employees are paid wages on the basis of the time they have worked rather than the volume of output they have produced. Hence, according to this system, wages are paid on hourly, weekly or monthly basis. Under time rate system, the wages earned by a worker is determined by using the following formula.

Wages Earned = Time spent (Attended) x Wage rate per hour/day/week/month

12. Give any two merits of time wage system.

Time wage system is beneficial for average and below average workers

Time wage system assures regular income and creates the feeling of economic security among the workers.

13. What is labour turnover?

Labour turnover may be defined as change in labour force. (% change in labour force during a specific period). High labour turnover indicates that the labour is not stabilised and there are frequent changes by way of workers leaving the organisation.

14. State two causes of labour turnover.

Two Causes of Labour Turnover are:

Lack of incentives and promotional avenues

Poor working conditions

15. What is idle time?

Idle time is the simply the time for which labour has been paid for but no work has been done. Whereas inefficiency arises when labour is actually engaged on production but output is not as expected or simply not 100%.

Idle time may arise out of normal or abnormal situations and it is the situation that will tell whether it is a normal idle time (unavoidable idle time) or abnormal idle time (avoidable idle time).

16. Give formula for Halsey plan.

S- Standard Time

T-Time Taken

R = Rate per hour

Earnings

Wages + Bonus

TXR+50% (S-T) XR

17. What is merit rating?

Merit rating aims at evaluating the performance of workers. Main objective of main rating is to reward the employee on the basis of efficiency and merit. It brings out the comparative worth of workers. The traits considered for merit rating are qualification, knowledge, skill, experience, attitude to the work, quality of work, efficiency, regularity, integrity, reliability, discipline and co-operation.

18. Write a note on payroll accounting?

Payroll Accounting is the function of calculating and distributing wages, salaries, and withholdings to employees and certain agencies. Accounting for Payroll is generally done through different documents such as time sheets, pay checks, and a payroll ledger.

19. What is flux method?

As the name suggests, it is the combination of the two methods separation and replacement. Labour turnover is found out by adding all separations a replacements and dividing by the average number of workers during a given period a; multiplying the result by 100.

20. What is Time rate system?

Under Time Rate system, the workers are paid on the basis of hourly, daily, weekly or monthly rate. There are five variations of time wages:

Flat Time Rate, High day rate, Measured day rate, Graduated time rate, Differential time rate.

21. What is payroll?

The payroll is the basis for ascertaining wages and posting entries to various control accounts. The details of payroll depends on requirements of the organisation. Preparation of payroll has two aspects; one is to arrive at gross wages and the second aspect is to compute statutory deductions in the form of ESI, PF, Income Tax, recovery relating to loans and advances etc.

22. Write the formula for piece rate system.

Piece Rate System is also called "payment by results". The workers are paid on the basis of output produced by them. The earnings of the workers depend on the number of units of output produced and the wage rate per unit received by the worker.

Earnings (Piece Rate System) = No of pieces produced X Rate per piece