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Accounting for Labour – ACCA Management Accounting (MA)

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    • 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.

  4. 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!!

  5. 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 🙂

  6. 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?

  7. 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?

  8. 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?

    • 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.

    • 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).

      • 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.

  11. 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.

  12. 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.

    • 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.

      • 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

  19. 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?.

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