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

2. 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

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

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

5. 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

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

7. Actual output x Standard time per unit
Efficiency Ratio
Actual output x Standard time per unit
x 100
Actual Time Taken
Standard time hours
Completion time hours
Efficient work
If standard time hours
Completion time hours
Inefficient work

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

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

10. Factory Overhead
(FOH)

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

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

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

14. 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.

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

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

17. 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

18. 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

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

20. 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 =

21. 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