Accounting for Labour - ACCA Management Accounting (MA)
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67 Comments
A
Adan·
Good day sir
The extra 150$ paid in piece rate example ,could you explain if that extra 150$ would me a part of indirect cost?
F
Faith·
Hi Sir in the piecework example where we have paid the employees 750 although they provided work of 600...how does the company get back on the 150 that has not been worked for? Or would this be taken as a loss to the company?
M
Muaaz·
Good day, sir
Can you give an example of overtime premium paid for a specific job at the customer’s request.
J
John MoffatTutor·
It is the situation where a customer makes a special order for something that the company does not hold in inventory. In order to produce it when the customer requires it the company has to way workers to work overtime.
S
S·
Why is the average number of employees 100+70 divided by two? That part is very confusing to me
J
John MoffatTutor·
If there are 100 at the start and 70 at the end, then the average is (100 + 70)/2. This is the normal way of calculating any average of two numbers. If you are still unsure then watch the later video on averages.
A
Ardala Isidore·
hi
S
Saskia·
Hello,
In the Kaplan textbook it says to work out the Labour turnover rate you put the number of employees that have left on the top, where as you have calculated it by looking at how many replacements have been made and putting that on top.
Which method would be correct.
Many thanks
J
John MoffatTutor·
I do not have the Kaplan books so as to check what they have. However what I do in my lectures is 100% correct and is what the ACCA expect.
S
Saskia·
Thank you very much John.
I appreciate your time
J
John MoffatTutor·
You are welcome :-)
T
talha·
sir here you explained an example of time work from the notes, saying that the total pay of the labour will be $30 whereas in the notes that example is explained as $30 only being the total overtime premium so I'm a bit confused now with overtime premium concept please explain it to me sir.
J
John MoffatTutor·
The notes don't say that - they say the same as the lecture.
If they were not paying extra for overtime then the 4 hours would have been paid 4 hours x $5 = $20.
Because the overtime is paid at time and a half, they will actually be paid 4 x 1.5 x $5 = $30. This is the total that will be paid for the 4 hours of overtime.
The overtime premium is the extra that they are paid for working overtime and so is 30 - 20 = $10 (or 4 hours x 0.5 x $5).
T
talha·
okay thank you for the help sir got it
J
John MoffatTutor·
You are welcome :-)
A
ANDREW·
good day, i am quite confused as to how we arrive at the figure of time - and - ahalf.
O
opentuition_teamAdmin·
Thank you for your comment :-)
A
Alby·
Sir, Do we need to pay the labour for their leisure time, the time taken to have lunch or tea? If we do, Is it an overhead?
J
John MoffatTutor·
Unless the question says different then we do pay for lunch etc.. When they are not working it is called idle time and is treated as an indirect cost (i.e. overhead) as stated in our notes and lectures :-)
S
Sohaib·
will these ratio formulas be given in the formula sheet?
J
John MoffatTutor·
No - they are not given on the formula sheet. You can see which formula are given in the exam on the formula sheet that is printed in our free lecture notes.
N
Nodirkhon·
In Labour turnover rate. Why are we dividing Replacements by the average number of employees instead of the Number of leavers divided by the average number of employees?
J
John MoffatTutor·
Because there are two separate reasons why we have fewer employees. One reason is obviously that we need fewer workers and so sack some of them. The other reason however it that employees leave because they are not happy for some reason, but we need the workers and so have to replace those who leave for that reason. The turnover rate is looking at the second reason.
D
Disha mehta·
Sir firstly great lecture!! But sir i didnt understand regarding ratios as the example sum, we are budgeted to produce 50,000 units in 20,000 hours so in labour capacity why did we compare to the actual result as actual produced was 65,000 so how can we compare the both? I got the labour efficiency part, we calculated the per unit price. But not able to understand the capacity ratio.
Thankyou!!
J
John MoffatTutor·
The capacity ratio is just checking whether or not we managed to get more or less labour hours than we budgeting on having available.
C
Chanda·
Great job you are doing team OTHELLO! Just wanted to comment on this lecture which I got to watch, could you clarify on the calculation of labour capacity as this was to be calculated using (actual÷ budgeted) ×100% but different approach was used thanks :)
J
John MoffatTutor·
A different approach is not used!!! It is calculated as (actual / budgeted) x 100% in the lecture.
E
Ermal·
a small question, as i couldn't understand regarding piecework - in the case the min wage is surpassed lets say actual pay1,000$ (min wage guaranteed $ 750) the extra $250 is Overtime premium?
J
John MoffatTutor·
No. Any overtime premium is a separate matter - it is if they are paid extra for working more than their normal hours.
E
Ermal·
thank you.
P
Pejman·
Hi
I have question about Remuneration methods "Piecework", (In week 2, they only produce 3,000 units, for which the pay would be 3,000 x $0.20 = $600.
However, since this is below the guaranteed minimum the employee will receive $750 for
the week.) my question is whether it should be in this condition might kept $600 as direct cost and $150 as indirect cost?
J
John MoffatTutor·
No - it is all a direct cost.
N
naj·
Jeremy Otter is paid basic salary of $10 an hour and overtime at time-and-a-quarter. Jeremy’s basic hours are 9 to 6 with an hour for lunch. Yesterday, Jeremy worked from 8 to 7. How much did Jeremy earn yesterday? *
sir how to calculate the salary in this?
J
John MoffatTutor·
In future please ask this sort of question in the Ask the Tutor Forum and not as a comment on a lecture.
He worked 11 hours and so his basic pay will be 11 X $10 = $110.
His basic hours are 9 hours and so there were 2 hours of overtime. Therefore he will receive an overtime premium of 2 x 1/4 x 10 = $5.
So his total pay is $115.
M
Madhu·
Sir I can't seem to get the answer for the last question (118.2% x 110.0%=130%) I can't seem to get the 130% instead I'm getting 1.3002.
Z
Zaneta·
Hi, I have the same question as above. Thank you.
J
John MoffatTutor·
1.3002 is the same as 130.02%
Thoughout all of the topics writing 1 is the same as writing 100%
A
Asif·
Sir, for production activity , why not use actual hours over budgeted hours - that is what actually happened. We should measure that performance. Why expected hours over budgeted hours.
A
Asif·
According to your example, expected hours (26,000hrs) was needed to produce 65,000 units as per budgeted standard hour rate, which was being compared to 22,000hrs actually taken.
If you compare expected hours to budgeted hours via ratio, the latter which was 20,000hrs, was budgeted to produce 50,000 units, not 65,000 units.
So how can we compare the both via ratio ? They dont seem to have a common factor. Budgeted is for 50,000 units (20,000hrs), expected is to produce for 65,000 units (26,000 hrs).
Elaboration appreciated to the understanding of the Production volume Ratio (Activity Ratio).
J
John MoffatTutor·
Although I have written the formula in the standard ACCA way (as you will see in the ACCA technical article), it is the same as simply dividing actual production (65,000 units) by the budgeted production (50,000 units), which is a ratio of 1.3.
How did we manage to produce more units than expected? By having more hours available than budgeted (the capacity ratio) and by working faster than expected (the efficiency ratio). Multiplying these two ratios together gives the production volume ratio.
A
Asif·
Hi sir. Great lecture.
Could you please explain the rationale behind associating overt timer premium connected to over work aside from customer request, and bonuses, to indirect costs ?
I did understand regarding sick leave and idle time - as they are no long doing direct labour over the products that are being produced. So due to their absence in the production of those items, they are thus now considered indirect expense.
Second, for labour turnover, why dont we divide the replacement by 100 (original employees) or 70 (employees remaining) and then multiply by a 100. Why find the average. What was the rationale behind that ?
Thanks alot for your lectures as always.
D
Dexter·
Hallo,I have a question on labour turnover ratio. What do we look there...the number itself of employees left the organisation or the number of worker that joined after some had left for avoidable reasons.I am now confused there, may you kindly sir.
J
John MoffatTutor·
It is the number who left and were replaced.
Let me give you two examples:
Suppose a company started the year with 10 employees. During the year 3 left. At the end of the year they had 12 employees. That means that they must have employed 5 new people. Of these 5, 3 were leavers who were replaced (the other 2 were new people and are not relevant for the formula).
Another. Suppose they started the year with 10 employees. During the year 3 left. At the end of the year they had 8 employees. That means they employed 1 new person and that 1 person replaced 1 of the leavers.
D
Dexter·
alright thanks much,i understand now.
J
John MoffatTutor·
You are welcome :-)
S
shazia786·
Hi John
In the efficiency ratio - are the expected hours the same as standard & budgeted ?
J
John MoffatTutor·
They are the standard hours for the actual production.
S
shazia786·
Thank you John
T
Taurus·
Are the formulaes given during the exam
J
John MoffatTutor·
The formulae given the exam are printed at the beginning of our free lecture notes. However these do not include the formulae for labour - these you have to learn.
A
ahrar·
sir
where i can get more practice questions?
J
John MoffatTutor·
It is essential that you buy a Revision Kit from one of the ACCA approved publishers (BPP and Kaplan). They are full of exam-standard question to practice and practice is vital for passing the exam.
S
Shanoy·
Sir I have a question, please assist me with answering the question, it goes like this
Chris is paid a regular 35 hours wee at a basic rate of $5. Overtime is paid at a premium of 50%. Chris is paid a time saved bonus whenever he completes his task in a shorter time than the budget time per unit as follows (normal hourly rate x 50% x time saved).
The budgeted time (time allowed to produce each unit is 2.5 hours. During week 27 Chris worked 60 hours and had completed 35 units.
What is Chris total salary?
A £317
B £318
C £431.25
D £372
J
John MoffatTutor·
You must ask questions like this in the Ask the Tutor Forum and not as a comment on a lecture.
A
ahrar·
sir
which one is the chapter of discounts?
J
John MoffatTutor·
Discounts are examined in Paper FA. They are not a specific topic in Paper MA.
A
Aamna·
mr.moffat in which chapter are the bonus schemes explained
J
John MoffatTutor·
Chapter 18 (although there is little explain because there is no such thing as a standard bonus scheme - anything in the exam is following the instructions given in the question).
A
Aamna·
sir in timework can u please explain the meaning of paid at time and half .I cannot understand it
J
John MoffatTutor·
Suppose the normal rate of pay is $10 per hour.
If they are paid time and a half for overtime work, then they are paid $10 + (1/2 x $10) = $15 per hour.
U
Umar·
hi Mr. Moffat,
I am confused about when you said while calculating overtime premium (OP): 'if it wasn't over time'.
we are paying 30$ which is overtime. but 5@4 = 20 that would be basic element in that overtime and rest is OP?.
J
John MoffatTutor·
The overtime is paid at the rate of $30 per hour (i.e. 1.5 x $20).
The normal rate is $20 per hour, so the overtime premium (i.e. the extra being paid) is $10 per hour.
C
Clayton Camilleri·
Will the ratios be available during the exam or do we have to learn?
J
John MoffatTutor·
You have to learn!
C
Clayton Camilleri·
Thanks :)
J
John MoffatTutor·
You are welcome :-)
M
Masabaku·
I have learned a lot from this,you are doing a good work thank you so much Sir for clarity
The extra 150$ paid in piece rate example ,could you explain if that extra 150$ would me a part of indirect cost?
Can you give an example of overtime premium paid for a specific job at the customer’s request.
In the Kaplan textbook it says to work out the Labour turnover rate you put the number of employees that have left on the top, where as you have calculated it by looking at how many replacements have been made and putting that on top.
Which method would be correct.
Many thanks
I appreciate your time
If they were not paying extra for overtime then the 4 hours would have been paid 4 hours x $5 = $20.
Because the overtime is paid at time and a half, they will actually be paid 4 x 1.5 x $5 = $30. This is the total that will be paid for the 4 hours of overtime.
The overtime premium is the extra that they are paid for working overtime and so is 30 - 20 = $10 (or 4 hours x 0.5 x $5).
Thankyou!!
I have question about Remuneration methods "Piecework", (In week 2, they only produce 3,000 units, for which the pay would be 3,000 x $0.20 = $600.
However, since this is below the guaranteed minimum the employee will receive $750 for
the week.) my question is whether it should be in this condition might kept $600 as direct cost and $150 as indirect cost?
sir how to calculate the salary in this?
He worked 11 hours and so his basic pay will be 11 X $10 = $110.
His basic hours are 9 hours and so there were 2 hours of overtime. Therefore he will receive an overtime premium of 2 x 1/4 x 10 = $5.
So his total pay is $115.
Thoughout all of the topics writing 1 is the same as writing 100%
If you compare expected hours to budgeted hours via ratio, the latter which was 20,000hrs, was budgeted to produce 50,000 units, not 65,000 units.
So how can we compare the both via ratio ? They dont seem to have a common factor. Budgeted is for 50,000 units (20,000hrs), expected is to produce for 65,000 units (26,000 hrs).
Elaboration appreciated to the understanding of the Production volume Ratio (Activity Ratio).
How did we manage to produce more units than expected? By having more hours available than budgeted (the capacity ratio) and by working faster than expected (the efficiency ratio). Multiplying these two ratios together gives the production volume ratio.
Could you please explain the rationale behind associating overt timer premium connected to over work aside from customer request, and bonuses, to indirect costs ?
I did understand regarding sick leave and idle time - as they are no long doing direct labour over the products that are being produced. So due to their absence in the production of those items, they are thus now considered indirect expense.
Second, for labour turnover, why dont we divide the replacement by 100 (original employees) or 70 (employees remaining) and then multiply by a 100. Why find the average. What was the rationale behind that ?
Thanks alot for your lectures as always.
Let me give you two examples:
Suppose a company started the year with 10 employees. During the year 3 left. At the end of the year they had 12 employees. That means that they must have employed 5 new people. Of these 5, 3 were leavers who were replaced (the other 2 were new people and are not relevant for the formula).
Another. Suppose they started the year with 10 employees. During the year 3 left. At the end of the year they had 8 employees. That means they employed 1 new person and that 1 person replaced 1 of the leavers.
In the efficiency ratio - are the expected hours the same as standard & budgeted ?
where i can get more practice questions?
Chris is paid a regular 35 hours wee at a basic rate of $5. Overtime is paid at a premium of 50%. Chris is paid a time saved bonus whenever he completes his task in a shorter time than the budget time per unit as follows (normal hourly rate x 50% x time saved).
The budgeted time (time allowed to produce each unit is 2.5 hours. During week 27 Chris worked 60 hours and had completed 35 units.
What is Chris total salary?
A £317
B £318
C £431.25
D £372
which one is the chapter of discounts?
If they are paid time and a half for overtime work, then they are paid $10 + (1/2 x $10) = $15 per hour.
I am confused about when you said while calculating overtime premium (OP): 'if it wasn't over time'.
we are paying 30$ which is overtime. but 5@4 = 20 that would be basic element in that overtime and rest is OP?.
The normal rate is $20 per hour, so the overtime premium (i.e. the extra being paid) is $10 per hour.