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MA Chapter 7 Questions Accounting for Labour

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  2. I don’t think 35.7% is a correct answer for question 2. If beginning employees were 80, 45 left and ending employees were 60, that just means that 25 new employees were brought in the company (80-45+25=60). The labour turnover ratio is =employees that left(on their own decision, not those that were let go of by the company)/av. number of employees. The question stated that 45 employees “left”, meaning they chose to leave, so the correct answer should be 45/((80+60)/2), which is 64.3%.

    • Short of a staffing crisis, a company would naturally look to retain staff and/or replace all of those that leave should that be their requirement. Therefore it is safe to assume that the 20 who were not replaced were let go of by the company.

    • Further down on this page John Moffat provides the following explanation-

      “If no workers has been replaced, then at the end of the year there would be 80 – 45 = 35 workers.
      Since there were actually 60 workers at the end of the year, it must mean that 60 – 35 = 25 workers were replaced.
      The average number of workers during the year = (80 + 60) / 2 = 70.

      Therefore the labour turnover rate = 25/70 = 35.7%”

    • If no workers has been replaced, then at the end of the year there would be 80 – 45 = 35 workers.
      Since there were actually 60 workers at the end of the year, it must mean that 60 – 35 = 25 workers were replaced.
      The average number of workers during the year = (80 + 60) / 2 = 70.

      Therefore the labour turnover rate = 25/70 = 35.7%

  8. Q2) ” during the year a total of 45 employees” ….
    a) during last year OR this year ?
    b) “Production workers” means wagers of day to day basis (direct labour), but “Employees” could mean direct and indirect labour both?

    Thoughts? 🙂 thank you kind Sir !

    • a) It is the year that both the first sentence and also the requirement refer to i.e. last year. (Otherwise it would be an impossible question anyway 🙂 )

      b) Direct production workers are employees. Although employees could include other workers as well, how would you intend to do the question if you did not assume that they are the same workers? (You are going to have to get used to this kind of wording in the exam – this is actually a past exam question!!)

    • The capacity ratio is actual hours worked divided by the budgeted hours. The number of units is not relevant for the capacity ratio which is simply measuring whether more or less hours were available in total.

      I do suggest that you watch my free lectures on this which go through each of the labour ratios. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

  14. Hi,

    On question 3 about labour capacity, the solution says 11,000(actual)/8,000(budgeted) = 137.5% but the 8,000 are for 20,000 units while the 11,000 are for 25,000, wouldn’t the solution have to be taking that into consideration?

    Thanks

  15. Please can you explain the labour efficiency question. Why for the standard hours of actual production do we do the sum (25,000/20,000) x 8,000?

    • If it makes it more obvious to you, the standard time per unit is 8,000 hours / 20,000 units = 0.4 hours per unit.

      Therefore the standard time for the actual production of 25,000 units is 25,000 x 0.4 hours = 10,000 hours.

    • Labour Efficiency Questions are quite easy

      according to question ,

      Company Budgeted = 20000 U In 8000 HRS
      Actually Tooked = 25000U In 11000 HRS

      So ,

      Time Taken to produce each Unit = 8000/20000

      Required time = 0.4 Hours for each Units

      EXPECTED TIME = 25000 Units * 0.4 Hours = 10000 Hours

      Actually Took = 11000 Hours { AS MENTIONED IN QUESTION }

      LABOUR EFFICIENCY RATIO —- EXPECTED TIME / ACTUAL TIME = 90.9 %

      HOPE ITS HELPFUL !

    • The question says in one day an employee produced 1200 units in which 32 were rejected. so to calculate total amount that employee produced, you should first eliminate rejected production from the total. This will give you a total of 1168 unite (1200-21=1168). since the company are paying their employees on a piece work basis you have to allocate only the required amount of units for the given schemes. first you need to multiply 500 with 0.5. After that, multiply another 500 with 0.75. These two calculations will bring your total output to 1000 so only 168 units are left to be allocated. So just multiply those remaining 168 units with 1. you will get an answer of 793 (500*0.5+500*0.75+168*1)

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