ACCA F2 Class Notes

CDP: Accounting for Labour

1. An employee is paid on a piecework basis. The scheme is as follows: 1 - 200 units per day $0.15 per unit 201 - 500 units per day > 500 units per day $0.20 per unit $0.25 per unit

Only the additional units qualify for the higher rates. Rejected units do not qualify for payment. An employee produced 512 units in a day of which 17 were rejected as faulty. Complete the following statements. The payment system is known as: ____________________________________________ The wages paid to the employee would be: _____________________________________ 2. RCW Ltd operates a bonus scheme based on time saved against a predetermined time allowance for actual output. In Week 6, an operative produced 750 units of 'R' in 32 hours. The standard allowance is 20 units of 'R' per hour. The time saved by this employee in Week 6 on 'R' production was: A. 6.50 B. 4.75 C. 5.50 D. 5.90 3. Gross wages incurred in a cost centre for the month of Janua ry totaled $45,250, as follows: $ Ordinary time direct employees 27,500 indirect employees direct employees basic premium Special conditions allowance direct employees indirect employees Shift allowance direct employees Sick pay direct employees The overtime is a regular feature. The direct wages for January would be: A. $31,550 B. $32,800 C. $35,300 D. $32,000 Overtime 6,500 4,500 2,250 1,300 450 2,000 750

4. HH operates an incentive scheme based on differential piecework. Employees are paid on the following basis: Weekly output up to: 600 units - $0.40 per unit 601-650 units - $0.50 per unit 650 units + - $0.75 per unit This is paid only upon production meeting quality standards with only the additional units qualifying for the higher rates. In Week 17, an employee produced 660 good units. The gross pay for the week would be: A. $272.50

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ACCA F2 Class Notes

B. $260.40 C. $488.25 D. $325.75 5. A job requires 2,400 actual labour hours for completion and it is anticipated that there will be 20% idle time. If the wage rate is $10 per hour, what is the budgeted labour cost for the job? A. $19,200 B. $24,000 C. $28,800 D. $30,000 6. A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total labour cost budgeted for the job is $36,300, what is the labour cost per hour? A. $8.25 B. $8.80 C. $ 11.00 D. $13.75 7. Employee A is a carpenter and normally works 36 hours per week. The standard rate of pay is $3.60 per hour. A premium of 50% of the basic hourly rate is paid for all overtime hours worked. During the last week of October 2001, Employee A worked for 42 hours. The overtime hours worked were for the following reasons: Machine breakdown: To complete a special job at the request of the customer: A. B. C. D. $145.80 $129.60 $140.40 $151.20 4 hours 2 hours

8. An employee is paid on a piecework basis. The basis of the piecework scheme is as follows: 1 to 100 units - $0.40 per unit 101 to 200 units-$0.50 per unit 201 to 299 units - $0.60 per unit with only the additional units qualifying for the higher rates. Rejected units do not qual ify for payment. During a particular day the employee produced 240 units of which 8 were rejected as faulty. What did the employee earn for their day's work? A. $109.20 B. $114.00 C. $139.20 D. $144.00 9. Information on standard rates of pay would be provided by: A. a trade union B. a production manager C. a personnel manager D. a work study manager. 10. Which of the A. Idle time B. Idle time C. Idle time following statements is correct? cannot be controlled because it is always due to external factors. is always controllable because it is due to internal factors. is always due to inefficient production staff.

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ACCA F2 Class Notes

D. Idle time is not always the fault of production staff. 11. A company operates a piecework scheme to pay its staff. The staff receive $0.20 for each unit produced. However the company guarantees that every member of staff receive at least $15 per day. Shown below is the number of units produced by Operator A during a recent week: Day Monday Tuesday Wednesday Thursday Friday Units produced 90 70 75 60 90 What are Operator A's earnings for the week? A. $75.00 B. $77.00 C. $81.00 D. $152.00 12. A business employs two grades of labour in its production department. Grade A workers are considered direct labour employees, and are paid $10 per hour. Grade B workers are considered indirect labour employees, and are paid $6 per hour. In the week just ended, Grade A labour worked 30 hours of overtime, 10 hours on a specific customer order at the customer's request, and the other 20 hours as general overtime. Grade B labour worked 45 hours of overtime, as general overtime. Overtime is paid at time-and-one-half. What would be the total amount of pay for overtime worked in the week that is considered to be a direct labour cost? A. $50 B. $150 C. $285 D. S350 13. A manufacturing business is currently extremely busy and overtime is being worked. The cost of the overtime premium payable to direct labour employees is normally treated as: A. B. C. D. a direct cost a production overhead an administration overhead cost a sunk cost.

14. A manufacturer employs two grades of labour in its machining department, grade A and grade B. Grade A employees are treated as direct labour employees and grade B employees are treated as indirect labour employees. Grade A employees are paid $8 per hour and grade B workers receive $6 per hour. The basic working week is 40 hours. Overtime is paid at time + 50%, to all employees in the department. There are 10 grade A employees and 6 grade B employees. Du r in g a p ar ti cu la r w ee k , ea ch g rad e A e mp loy e e wo rk ed for 45 h ou r s a n d ea ch g rad e B e mp l oye e wo rk ed for 4 3 h ou r s. Wh at wi ll b e th e ch a rg e to p rod u ct ion o ve rh ead for th e we ek ? A. $5 4 B. $2 54 C. $l, 60 2 D. $1, 80 2 15. An employee is paid on a stepped piecework basis, as follows. Units produced each week $ 1 -200 0.60 per unit 201 -300 0.80 per unit Over 301 1.00 per unit

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ACCA F2 Class Notes

Only the additional units qualify for the higher rates. Rejected units do not qualify for any payment During a particular week, the employee makes 380 units, of which 35 were rejected as faulty. What were his gross earnings for the week? A. $245 B. $280 C. $345 D. $380 16. An employee is paid on a piecework basis. The scheme is as follows: 1-100 units per day $0.20 per unit 101 - 200 units per day $0.30 per unit 200 units per day $0.40 per unit Only the additional units qualify for the higher rates. Rejected units do not qualif y for payment. An employee produced 210 units in a day of which 17 were rejected as faulty. How much did the employee earn for the day? A. $47.90 B. $54.00 C. $57.90 D. $84.00 17. It is expected that a product will take 36 minutes to produce. In a period 180 hours are worked and 325 units of product are made. A bonus of half of the time saved is paid to the employees. The wage rate is $8.00 per hour. Calculate: Normal Pay: _____________________ Bonus: Total Pay: _____________________ _____________________

18. A company employs 30 direct production staff and 15 indirect staff in its manufacturing department. The normal operating hours for all employees is 37 hours per week and all staff are paid a basic rate of $8 per hour. Overtime hours are paid at the basic rate + 50%. During a particular week all employees worked for 42 hours to meet the company's general production requirements. Calculate: Direct labour cost: ___________________ Indirect labour cost: _________________ 19. In a payment by results scheme employees are paid a bonus based on hours saved at the basic wage rate. The bonus payable to the employee is calculated as the hours saved multiplied by the ratio of time taken to time allowed. An employee produces 480 units in 72 hours. Th e time allowed for this number of units is 108 hours. The employee's basic rate of pay is $ 1.40 per hour. Calculate total amount payable to employee: __________________________ 20. An employee is paid on a piecework basis as follows. Up to 100 units per week $2.40 per unit 101 to 120 units per week $2.70 per unit 121 units or more per week $3.00 per unit Only the additional units qualify for the higher rate and rejected units do not qualify for payment.

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ACCA F2 Class Notes

In a week when the employee produced 133 units of which 11 were rejected what would be the employee's gross pay for the week? A. B. C. D. $297 $300 $333 $366

21. A manufacturing organisation has 24 employees who are paid a basic hourly rate of $6.00 for a standard 38 hour week with any overtime hours being paid at a ra te of time and a half. In a typical week the employees all work 4 hours of overtime and produce 2,500 units of the organisation's product. What is the total unit labour cost for the product? A. $2.19 B. $2.30 C. $2.42 D. $2.53 22. A manufacturing organisation operates a piecework system of wage payment whereby each employee is paid $7.40 per unit for the first 25 units produced in a week and $8.20 per unit for any units in excess of this amount. There are 33 employees and it is expected that each will produce 29 units per week. What is the total unit labour cost? A. B. C. D. $6.60 $7.40 $7.51 $8.20

23. Consider the following statements. 1 Overtime payments are generally treated as indirect costs 2 The cost of idle time is generally treated as an indirect cost Which one of the following is correct regarding the above statements? A. Both statements are correct B. Both statements are incorrect C. Statement 1 is correct but statement 2 is incorrect D. Statement 1 is incorrect but statement 2 is correct Data for questions 31 and 32 During the month of September 20X3 the following labour hours were worked. Direct production workers - 2,300 hours plus 500 hours of overtime Indirect workers - 640 hours including 120 hours of overtime The direct workers are paid $7.20 per hour and the indirect workers $6.20 per hour. Overtime hours are paid at time and a half. Of the hours paid to the direct production workers 100 of these were idle time hours. 24. What is the direct labour cost for the month? A. $16,560 B. $16,740 C. $19,440 D. $20,160 25. What is the indirect labour cost for the month? A. $3,224 B. $4,340

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ACCA F2 Class Notes

C. $6,140 D. $6,860 26. At the end of week 23 a business made a payment for net wages of $17,800. This was after deductions for PAYE and NIC of $5,900. Of the gross amount of $23,700, $3,700 was for indirect wages and the remainder was for direct workers' wages. What is the double entry for the labour costs for the week? A Debit Wages control $23,700 Credit Work in progress Credit Production overhead B Debit Credit Credit c Debit Debit Credit. D Debit Debit Credit Wages control Work in progress Production overhead Work in progress Production overhead Wages control Work in progress Production overhead Wages control $20,000 $3,700 $23,700 $3,700 $20,000 $23,700 $23,700 $3,700 $20,000

$20,000 $3,700

27. During the month of July 20X3 the gross pay of the direct production workers in a manufacturing business was $32,000 with deductions for PAYE (income tax) and national insurance contribution of $10,600. Three quarters of the wages bill is for direct production wo rkers. What is the amount to be debited to the work in progress account? A. $5,350 B. $8,000 C. $16,050 D. $24,000 Data for questions 35 and 36 In week 23 the direct production workers of an organisation worked for 740 hours including 110 hours of overtime. The indirect workers worked for 200 hours which included 40 hours of overtime. Included in the direct workers' hours were 50 hours of idle time. The direct production workers have a basic rate of $8.40 per hour and the indirect workers have a basic rate of $6 per hour. All overtime is paid at time plus one third. 28. What is the amount to be debited to the work in progress account? A. $2,008 B. $5,796 C. $6,216 D. $6,524 29. What is the amount to be debited to the production overhead control account? A. $1,280 B. $1,588 C. $2,008 D. $5,796

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