1. AAT Level 3 Labour Overtime/Equivalent Units/Bookkeeping

2. AAT Level 3 Labour Costs – Assessment Criteria 2.1SRecord cost information for material, labour and expenses in accordance with the organisation’s costing procedures 2.2SAnalyse cost information for material, labour and expenses in accordance with the organisation’s costing procedures

3. Cost Card Direct Materials +Direct Labour +Direct Expenses = PRIME COST + Production Overheads = PRODUCTION COST + Non Production Overheads = TOTAL COST Start with 3 DIRECT costs Then 2 lots of OVERHEADS

4. Direct & Indirect Labour Cleggs Ltd build and sell vintage bicycles. Define the terms below and give examples based on Cleggs Ltd Can be associated with the product Cannot be associated with the product

5. Time Keeping Records How do you record your time/activity at work?

8. Methods of Payment

10. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 249Paul (B)49 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity Cost the two jobs

11. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20 249Paul (B)49 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

12. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

13. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

14. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

15. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)2 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

16. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

17. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)107 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

18. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

19. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)74 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

20. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)747.20 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

21. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)747.20 532.80 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

22. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)747.20 532.80 1298.20 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

23. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)747.20 532.80 1298.20 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity

24. JobEmployeeHours Hourly basic rate Total per employeeJob total 249George (A)14 8.20114.80 249Paul (B)49 7.40362.60 477.40 250George (A)28.20 16.40 250John (D)1077.00 749.00 250Ringo (C)747.20 532.80 1298.20 Rates of pay: GradeBasic rate A£8.20 B£7.40 C£7.20 D£7.00 You have been given the following information from the timekeeping records of Billie Jeans: Activity – Time Rate

25. The EXTRA amount paid over and above the normal rate, for overtime hours Overtime Overtime Payment Overtime Premium The TOTAL amount paid for hours worked above the normal contracted hours Employee paid time + half for overtime Overtime paymentOvertime premium (i.e. time AND half)(i.e. the ‘half’)

26. Overtime Employee paid time + half for overtime Overtime paymentOvertime premium (i.e. time AND half)(i.e. the ‘half’) David is paid £8.20 per hour for a standard 40 hour week. Last week he worked 45 hours. What is the gross pay showing OT payment? Basic hours40 x £8.20 =£328.00 Overtime PAYMENT 5 X (£8.20 X 1.5)£61.50 £389.50 What is the gross pay showing the OT premium? Basic hours 45 x £8.20£369.00 Overtime PREMIUM 5 x (£8.20 x 0.5)£20.50 £389.50

27. Activity - Overtime Employee paid time + half for overtime Overtime paymentOvertime premium (i.e. time AND half)(i.e. the ‘half’) Nick is paid as follows: Basic pay for 6 hours shift each day from Monday – Friday Additional hours from Monday – Friday are paid at time + half Saturday contracted to work 3 hours for basic pay with extra hours paid a t double time Sunday hours are all paid at double time Use template provided

28. Employees weekly timesheet for week ending 12 December Name: Nick BrownCost CentreMachining Employee Number:Y4791Basic pay per hour£12 Hours spent on: DayProduction Indirect workNotesBasic Pay£ Overtime premium Total pay £ Monday62 1-3 cleaning machinery Tuesday24 9-1 training course Wednesday8 Thursday6 Friday61 2-3 Health & Safety training Saturday6 Sunday3 Total377

29. Activity - Nicola Nicola works for Highland Knits operating one of their industrial knitting machines. She is works from 9am to 5pm with one hour for lunch. She earns £7.50 per hour. Overtime hours are paid at time + quarter. Complete the table below: Answer next slide In your notebooks

30. Activity - Nicola 60.00 8 hours x £7.50 1.88 Overtime is: Time + ¼ Overtime Premium is £7.50 ÷ 4 = 1 x £1.875 – rounded to £1.88 61.88 Nicola works for Highland Knits operating one of their industrial knitting machines. She is works from 9am to 5pm with one hour for lunch. She earns £7.50 per hour. Overtime hours are paid at time + quarter. Complete the table below:

31. Practice Activity Bolyn Ltd (see OT sheet) Answer next slide

32. Practice Activity Bolyn Ltd (Answer) Bolyn Ltd Anne To be used later

33. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours Long PJ51.5 hours Onesies121 hour Nightshirts62 hours Total for week 26 Draw in your notebooks

34. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours Long PJ51.5 hours Onesies121 hour Nightshirts62 hours Total for week 26 Short PJ 6 item x 2 hours x Rate £7.50 p/h

35. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours Onesies121 hour Nightshirts62 hours Total for week 26 Short PJ 6 item x 2 hours x Rate £7.50 p/h

36. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours Onesies121 hour Nightshirts62 hours Total for week 26 Long PJ 5 item x 1.5 hours x Rate £7.50 p/h

37. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour Nightshirts62 hours Total for week 26 Long PJ 5 item x 1.5 hours x Rate £7.50 p/h

38. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour Nightshirts62 hours Total for week 26 Onesies 12 item x 1 hour x Rate £7.50 p/h

39. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours Total for week 26 Onesies 12 item x 1 hour x Rate £7.50 p/h

40. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours Total for week 26 Onesies 12 item x 1 hour x Rate £7.50 p/h

41. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours Total for week 26 Nightshirts 6 item x 2 hour x Rate £7.50 p/h

42. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours90.00 Total for week 26 Nightshirts 6 item x 2 hour x Rate £7.50 p/h

43. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours90.00 Total for week 26 Nightshirts 6 item x 2 hour x Rate £7.50 p/h

44. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours90.00 Total for week 26

45. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours90.00 Total for week 26

46. Paid per unit usually based on a specified time to complete Example: Nigel Garage works for Kip U who design and sell nightwear. He is paid £7.50 per standard hour of production. His production levels for week 26 are shown in the table below. Calculate the total amount earned per item and his gross pay for the week. ItemNumber produced Standard time allowed per unit Amount Earned £ Short PJ62 hours90.00 Long PJ51.5 hours56.25 Onesies121 hour90.00 Nightshirts62 hours90.00 Total for week 26326.25

47. Methods of Payment

48. Example Standard rate per hour£4.50 Guaranteed minimum per week35 hours Actual production: 10 units @3 hours per unit. Calculate the weekly pay. 10 units x 3 hours = 30 hours pay 30 hours x £4.50 = £135 < GMP So pay for the week is £157.50

49. Activity Standard rate per unit£3.00 Guaranteed wage per 8 hour day£28.00 Monday12 units Tuesday14 units Wednesday9 units Thursday14 units Friday8 units Calculate the weekly wage: Answer next slide

50. Activity Standard rate per unit£3.00 Guaranteed wage per 8 hour day£28.00 Monday12 units12 x £3 =£36.00 Tuesday14 units14 x £3 =£42.00 Wednesday9 units9 x £3 = £27.00 Thursday14 units14 x £3 = £42.00 Friday8 units8 x £3 = £24.00 Calculate the weekly wage:£176.00 (£36 + £42 + £28 + £42 + £28)

51. Methods of Payment Day rate based on hours worked PLUS Bonus based on quantity produced or time saved

52. Example – Nick Day rate£4.50 x 8.5 = £38.25 Std time for 15 units is 15 x 40/60 = 10 hours Time taken= 8.5 hours Time saving = 1.5 hours Bonus = 1.5 x £4.50 x 60%£4.05 Pay for the day = £38.25 + £4.05 = £42.30 Hours worked – 8.5Hourly rate is £4.50 Units take 40 minutes each Bonus rate is 60% of hourly rate for each hour saved Calculate pay for the day.

53. Activity – Ed Ed has worked 7.5 hours and produced 60 units. His hourly rate is £10.00 and a bonus of £5 per hour is paid for time saved. Standard time for 6 units is 1 hour. Calculate pay for the day. Answer on next slide

54. Activity – Ed Day rate£10 x 7.5 = £75.00 Std time for 60 units= 10 hours Time taken= 7.5 hours Time saving = 2.5 hours Bonus = 2.5 x £5= £12.50 Pay for the day = £75 + £12.50 = £87.50 Ed has worked 7.5 hours and produced 60 units. His hourly rate is £10.00 and a bonus of £5 per hour is paid for time saved. Standard time for 6 units is 1 hour. Calculate pay for the day.

55. Equivalent Units Goods that are work in progress for materials & labour You produce marmalade 6000kg produced and sent to be bottled. 1000kg are WIP (40%) for Labour Calculate the total equivalent units

56. Equivalent Units 6000kg 400kg 1000kg x 40% 6400kg Goods that are work in progress for materials & labour You produce marmalade 6000kg produced and sent to be bottled. 1000kg are WIP (40%) for Labour Calculate the total equivalent units

57. Example - CED Ltd (See sheet) CED Ltd have forecast the following information for next week: The piecework rate will be £0.60 per completed unit. The target for production is 2500 units and a bonus, equal to 40% of the piecework rate, is payable for equivalent units of production in excess of this. 2700 units will be complete next week and the closing work in progress is expected to be 50 units, which will be 50% complete with regard to labour. No opening work in progress was expected at the start of the week. Calculate the EUP with regard to labour for next week. What will the bonus payable (£)? We need to pick out the relevant information

58. Summary of information for CED Ltd Piecework rate = 60p PER COMPLETED UNIT Bonus rate = 40% of 60p for units >2500 = 24p 2700 units will be complete next week Closing WIP 50 units x 50% complete Equivalent to 25 complete units (50 x 50%) 2700 + 25 = 2725 less 2500 = 225 over target So bonus is 225 x 24p = £54 Production target is 2500 units

59. Worked example (See sheet) £3.70£7.40 74.00 51.80 59.20 51.80 66.60 303.40 11.10 0 3.70 0 7.40 22.20 85.10 51.80 62.90 51.80 74.00 325.60 Katherine Aragon

60. Worked Example continued: Equivalent Units are: 500 ltrs x 60% = 300 2800 litres 168.00 Bonus Payable: 2800 ltrs x 0.06 = 168.00 325.60 168.00 493.60 2500+ 300 =

61. Bookkeeping for Labour Costs

62. Wages Control (WAC) Gross Wages (GW Expense) Total cost of employing staffHow its distributed Total cost of employing staff

63. Bookkeeping for Labour Costs Wages Control (WAC) Wages Month/Year £XXX WIP Gross Wages (GW Expense) This may be split between direct & indirect, production & non production Production OH (Indirect) (Direct) Non Production OH (Indirect) Employer NI Employer Pension Cont. Total cost of employing staff Bank (Net Pay) HMRC (EE & ER NI + PAYE) Pension Cont. EE & ER Other payments made on behalf of EE How its distributed

64. Bookkeeping for Labour Costs Wages Control (WAC) WIP - Direct Production OH (ID) Non Production OH (ID) Employer NI Employer Pension Cont. Bank (Net Pay) HMRC (EE & ER NI + PAYE) Pension Cont. EE & ER Other pmts made on behalf of EE WIP Production OH Non Production OH X X X How its distributed Total cost of employing staff

65. Worked Example Bank 82500 Wages CONTROL Account 82500 PAYE & NI deductions27500 Wages CONTROL Account 84700 Wages CONTROL Account 25300 WIP (Direct Labour) Production OH (Indirect) Remember the Wages Control is always one side of the journal

66. Activity WIP (Direct) 220000 Production (Indirect) 58000 Non production (Indirect) 2000 Bank 200000 HMRC Payable 50000 Welfare 30000 280000

67. WIP 220000 Wages Control Account 220000 Wages Control Account 58000 Wages Control Account 2000 Production Overheads 58000 Non Production Overheads 2000 Wages Control Account 200000 Bank (Net Pay) 200000 Wages Control Account 50000 HMRC Payable 50000 Wages Control Account 30000 Welfare 30000

68. Practice Activities (See sheet)