Paper F2 management Accounting

Chapter 7 accounting for labour

Measuring labour activity Accounting for labour Measuring labour activity Remuneration methods Recording of labour cost Labour turnover Accounting for labur

Measuring labour activity ·Production and productivity ·Planning and controlling production and productivity ·Productivity and its effect on cost ·Efficienvy, capacity and production volume ratios

Production and productivity Production is the quantity or volume of output producted. 2.Productivity Productivity is a measure of the efficiency witch output has been produced

Planning and controlling production and productivity 1.Production levels can be raised as follows Working overtime Hiring extra staff Sub-contracting some work to an outside firm Managing the work force so as to achieve more output 2.Production levels can be reduced as follows Cancelling overtime Laying off staff 3.Productivity,if improved, will enable a company to achieve its production targets in fewer hours of work, and therefore at a lower costs

Productity and its effect on cost 1.Improved productivity is an important means of reducing total unit costs. An increase in production without an increase in productivity will not reduced unit costs. 2.Automation For control purposes, a new measure of productivity is required, output per machine hour,which may then be measured against a standard output for performance reporting.

Efficiency,capacity and production volume ratios Other measures of labour activity Production volume ratio, or activity ratio生产量比率 Efficiency ratio (or productivity ratio)效率比 Capacity ratio产能比数

Remuneration methods Why we need to find labour remuneration methods which suit for company? There are two effects about labour remuneration methods 1.the cost of finished products and services. 2.the morale and efficiency of employees. There are three basic groups of remuneration method: time work, piecework scheme and bonus(incentive )schemes

1.time work The day-rate system. The formula is : wages=hours worked × rate of pay per hour . Overtime premiums: if an employee works for more hours than the basic daily requirement ,he may be entitled to an overtime payment. This means he will get more money because the extra time he worked. Hours of overtime are usually paid at a premium rate.

2.Piecework schemes There are two points we should notice The formula is :wages=Units produced × Rate of pay per unit. There are two points we should notice 1,It’s normal for pieceworkers to be offered a guaranteed minimum wage. 2,there is standard time allowance is given for each unit to arrive at a total of piecework hours for payment. So there are two types schemes: The paid for each works or the paid for per piecework hour produced.

3.Bonus schemes In general, bonus schemes were introduced to compensate workers paid under a time-based system for their inability to increase earnings by working more efficiently. High day-rate system :a system where employees are paid a high hourly wage rate in the expectation that they will work more efficiently. Individual bonus schemes: a remuneration scheme whereby individual employees qualify for a bonus on the top of their basic wage, with each person’s bonus being calculate separately. Group bonus schemes: an incentive plan which is related to the output performance of an entire group of workers, a department, or even the whole factory.

Time work Piecework scheme Bonus scheme Whether there are basic payments Yes Whether they are easy to be use No (we should make a reasonable minimum wage , if too high ,no incentive effort ) (we should make a balance between employees and employers Whether there are incentive for employees The objectives Everyone whose salary are paid by time work Everyone whose wages are paid by piecework scheme Only those employees who make the extra effort The suitable departments Administration department Product ,selling and distribution department Research and development department

Timekeeping departments Attendance time Job time Idle time(Idle time rate : Idle time rate=Idle hours/ total hours×100%） Wage department Payroll system Cost accounting department

labour turnover labour turnover is the rate at which employees leave a company Costs associated with labour turnover can be split into two categories: Replacement costs Preventative costs labour turnover reason s can be divided into controllable and uncontrollable

Measuring labour turnover labour turnover is also a measure of the number of emploees leaving/being recruited in a period of time expressed as a percentage of the tolal labour force

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