Labour Cost Control in cost accounting

Labour Cost Control

1. Presented By: Krishna Gupta B.B.A. 2 Sem. Labour Cost Control Presented By: Krishna Gupta B.B.A. 2 Sem.

2. Contents Introduction Classification Labour cost control Casual worker Out worker Leave with pay Holiday with pay Idle time Classification of idle time Incentive plans

3. Labour refers to human efforts and skill utilised in the production of goods or in the performance of service or in the execution of jobs. Introduction

4. Classification Of Labour Labour can be classified into two categories i.e. Direct labour- Direct labour is that which is directly engaged in production work and can be conveniently identified. 2. Indirect Labour- Indirect labour refers to that labour which cannot be conveniently identified with a particular cost or cost unit.

5. Labour cost control refers to the control of labour cost per unit of production through proper employment and efficient utilisation of labour force Labour Cost Control

6. Casual Worker Casual worker are those workers who are employed casually either daily or short periods, when there is some extra work or urgent work in the factory or when some of the regular workers of the factory are on leave.

7. Out Worker A workers do not work in factory but work independently in his house, is called Out workers.

8. Leave With Pay Workers are entitled to annual leave with full pay for a specified number of days in a year.

9. Labours or workers are given paid holiday for some national day or festival. Such holiday for which workers are get salary or wages, is called holiday with pay. Holiday With Pay

10. Idle time represents time lost by workers who are paid on time basis. When workers are paid on time basis, some difference between the time for which they are paid and that which they actually spend on production. Idle Time

11. Classification Of Idle Time Normal Idle Time Abnormal Idle Time

12. Time taken by the workers to reach their department from factory gate. Setting up tools, equipments and machines. Moving from one job to another. In attending their personnel needs. Tea and lunch. Minor accident to any workers. Normal Idle Time

13. Major break down of machinery. Power failure due to external cause. Major accident to workers. Improper planning by the management. Non-availability of material in the market. Fire, floods, storms, earthquake etc. Abnormal Idle Time

14. Various Incentive Plans The primary purpose of an incentive plan is to induce a worker to produce more to earn a higher wage. Naturally, producing more in the same period of time should result in higher wages for the workers.

15. Halsay Premium Plan : This plan was introduced by F.A. Halsay in 1981. The features of this plan are as follows: Workers are paid at a rate per hour for the actual time taken. A standard time is set for each piece of work. If a worker takes standard time or more than standard time, he is paid wages for actual time taken. If a worker takes less than standard time, he is paid a bonus equal to 50% of the time saved .

16. Standard Time = 5hrs. Actual time = 3hrs. Bonus = 50% Wages per hour = Rs. 10 Solution: Wages = time taken× wages p.h. = 3×10 Wages = 30 Bonus = 10×2×50/100 = Rs. 10 Total wages= 30+10= Rs.40 Total wages = wages of time taken+ Bonus Bonus = wages p.h. × time saved× 50%

17. This plan is also similar to Halsey plan except in the calculation of bonus. The main features of Rowan Plan are as follow : 1. Workers are paid at a rate per hour for the actual time taken. 2. If a worker takes standard time or more than standard time, he is paid wages for actual time taken. 3. If a worker takes less than the standard time, he is entitled to a bonus. Rowan Premium Plan :

18. Total wages = wages of time taken+ Bonus Bonus = Wages p.h.× time taken × time saved standard time

19. This system was introduced by F.W. Taylor, the father of scientific management. The main features of this plan are as follow: 1. Day wages are not guaranteed, i.e. , it does not assure any minimum amount of wages. 2. A standard time for each job is set very carefully after time and motion studies. Taylor’s Differential Piece Rate System :