Lecture-14 Main Ahmed Farhan (ACA) Labor Lecture-14 Main Ahmed Farhan (ACA)

Labor Turnover Ratio/Employee Turnover Ratio It is relative measure of employees leaving over the average number of employee during one accounting period. No of employees left or Discharge x 100 Average No of employees

Example No. of workers on 1st Jan 2005 1900 No. of workers after 1 months 2100 Terminate workers 60 Resigned workers 20 Average no of workers and Labor turnover ?

Average number of workers Solution Average number of workers Opening NO. of workers + Closing No. of workers 2 1900 + 2100 = 2000

Solution No of employees left or Discharge x 100 Average No of employees = 80 / 2000 * 100 = 4% Per month One year turn over= 4% * 12 = 48 % Per year

Reasons of workers Living Poor Remuneration Poor working Conditions No proper Training Retirements Death Illness Others Families Problems

Actual output x Standard time per unit Efficiency Ratio Actual output x Standard time per unit x 100 Actual Time Taken Standard time 50 hours Completion time 40 hours Efficient work If standard time 50 hours Completion time 60 hours Inefficient work

Example Standard time allowed 2 hours Standard hours allowed 200 hours Budget standard production 100 units Actual hours worked 210 hours Standard hours for 120 units?

Actual output x Standard time per unit Solution Actual output x standard time 120 X 2 hours = 240 hours Efficiency of Labor= 114% Actual output x Standard time per unit x 100 Actual Time Taken = 240 / 210 * 100

Factory Overhead (FOH)

Factory Over Head & Its Behavior It is an Indirect Production cost. Fixed Cost Step Fixed Cost Variable Cost Semi Variable Cost

Kinds of Different Cost Centre It is an area of entity for which the cost can be identified or where cost is incurred.

FOH Cost Allocation & Apportionment Cost that can be identified with specific cost centers. Apportionate Cost that cannot be identify with specific cost centre.

Steps of Allocation & Apportionment Item wise collection of F.O.H. cost. Identifying cost centre (Production & Services). Allocating and apportioning general F.O.H cost to the and service cost centers. Apportioning F.O.H cost at service cost centers to the production cost centers. Calculation of total F.O.H cost for each production cost centers. Determining F.O.H rate for each production cost center.

F.O.H Absorption Rate F.O.H Absorption Rate = Estimated F.O.H cost Base

Bases For F.O.H Absorption Rate Direct Labor hours Machine hours No. of unit produced Direct labor cost Prime cost

Example Apportion each of the cost given in four cost centers A, B, C, D Supervision Rs. 7,525 Indirect workers 6,000 Holiday pay & national Ins. 6,200 Tolling cost 9,400 Machine Maintenance labor cost 4,500 Powers 1,944 Small tools & Supplies 1,171 Insurance of machinery 185 Insurance of building 150 Rent & rates 2,500 Depreciation of machinery 9,250

Solution A B C D Total 1. Floor Space 1800 1500 800 900 5,000 2. Kilowatt hours 270,000 66,000 85,000 65,000 486,000 3. Cost of machine 30,000 20,000 8,000 16,000 74,000 4. Indirect workers 3 1 8 5. Total workers 19 24 12 7 62 6. Machine maintenance hrs 3,000 2,000 1,000 9,000 Supervision cost 2,050 2,200 1,775 1,500 7,525 Tooling cost 3,500 4,300 600 9,400 Small tools & supplies 491 441 66 173 1,171 Machine running hours 36,000 19,000 93,000 A

Solution Indirect labor A = 6000 / 8 *3 = 2,250

Solution Holiday Pay A = 6200 / 62 * 19 = 1,900 B = 6200 / 62 * 24 = 2,400 C = 6200 / 62 * 12 = 1,200 D = 6200 / 62 * 7 = 700

Solution Machine maintenance labor cost A = 9400 / 9000 * 3000 = 3,133 B = 9400 / 9000 * 2000 = 2,089 C = 9400 / 9000 * 3000 = 3,133 D = 9400 / 9000 * 1000 = 1,044