2a standard hr content product a product b product c

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2a) STANDARD HR. CONTENT PRODUCT A PRODUCT B PRODUCT C TOTAL STANDARD HOURS PROCESS DRILL / TAP POLISH ASSEMBLY 2b) FACTOR OF 100 CLOCK HOURS TO STANDARDHOURS 2c) TOTAL CLOCK HOURS (2a x 2b) 2d) ANNUAL CLOCK HOURS PER OPERATIVE (48 x 38) 2e) NUMBER OF OPERATIVES (2cT2d) ( 1 PLACEOF DECIMAL)
- 213 -PRINCIPLE In c o n v e n t i o n a l c o s t i n g a p p l i c a t i o n s , wages paid to d i r e c t workers for n o n - p r o d u c t i v e time are regarded as overhead and n o t d i r e c t l a b o u r c o s t s . STEP 3 CALCULATE i ) THE WAGES FOR PRODUCTIVE WORK i i ) THE WAGES FOR NON-PRODUCTIVE WORK 3a) STANDARD HOUR CONTENT OF PRODUCTION(2a) 3b) CLOCK HOUR RATE 3c)WAGES FOR PRODUCTIVE WORK (a x b) 3d) FACTOR OF CLOCK HOURS ON PRODUCTIVE WORK TO STANDARD HOURS (3 PLACES OF DECIMALS) 3e) CLOCK HOURS ON PRODUCTIVE WORK (a x d) 3f) TOTAL CLOCK HOURS(2c) 3g) CLOCK HOURS ON NON-PRODUCTIVE WORK (f - e) 3h) WAGES FOR NON-PRODUCTIVE WORK (g x b) PROCESS DRILL/TAP POLISH ASSEMBLY PRINCIPLE Holiday pay for direct workers is accounted for as overhead and not direct labour cost. In SUPER PROCESSORS, holiday pay is calculated by reference to average weekly earnings exclusive of overtime premiums.
- 214 -STEP 4 CALCULATE THE BUDGETTED COST OF HOLIDAY PAY FOR DIRECT WORK HOURS. 4a) TOTAL ATTENDANCE WAGES (3c + 3h) 4b) AVERAGE HOURLY RATE (4a^3f) 4c)AVERAGE WEEKLY WAGE (4b x 3f) (2 DECIMAL PLACES) 4d) HOLIDAY PAY (4c x 2e) (NEAREST £) PROCESS DRILL/TAP POLISH ASSEMBLY PRINCIPLE Where a company operates a sick pay scheme, any such payments for sick leave are costed to SICK PAY which is a overhead account. Super Processors Ltd estimate that paid sick leave will amount toUweeks per man with a further\week per man for unpaid absences. Time lost for absence is made good by overtime working. Overtime clock hours are paid for at a premium of 50% above the clock hour rate. Sick pay is paid for at the average hourly rate. STEP 5 CALCULATE i ) THE BUDGET COST FOR SICK PAY i i ) THE BUDGET COST FOR OVERTIME PREMIUM 5a) NUMBER OF MEN (2e) 5b) HOURS OF PAID SICK LEAVE (5a x1\x 3f) to 1 DECIMAL PLACE PROCESS 5c) COST OF PAID SICK LEAVE (5b x4b)NEAREST £ 5d) HOURS OF UNPAID ABSENCE (5a xix 38) 5e) TOTAL HOURS OF ABSENCE (5b + 5d) 5f) CLOCK HOUR RATE x\ 5g) OVERTIME PREMIUM (5e x 5f) DRILL/TAP POLISH ASSEMBLY
- 215 -PRINCIPLE Sick and holiday pay and also overtime premiums are accounted for as overheads that are directly identified with the operating cost centres. Similarly, national insurance costs and pension fund contributions,(the employers portion) are budgetted as general overheads that can be directly identified with the operating cost centres. The company in this example estimated its contributions at 15% for national insurance and125%for pension fund or total direct wages inclusive of overtime premium, paid sick leave and holiday pay.

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