Labour cost control b.v.raghunandan

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deals with the importance of labour cost control,, the instruments used for time recording devices, time booking, idle time, labour turnover and methods of remuneration

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  • very informative. Thanks Raghu Sir
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Labour cost control b.v.raghunandan

  1. 1. Cost & ManagementAccounting -B.V.Raghunandan, SVS College, Bantwal
  2. 2.  Direct Labour  Indirect Labour  Labour Cost Control  Personnel Department  Production or Engineering Department  Time Keeping Department
  3. 3. A.Time Recording B.Time Booking
  4. 4.  Manual Methods: -Attendance Register -Disc System  Mechanical Methods -Time Recording Clock - DialTime Recorder  Electronic Devices - Swipe Card - Bio-Metrics
  5. 5.  Time Booking is tracing the time spent by the worker and identifying such time to jobs, processes or operation so as to calculate the wage cost of such processes, jobs or operations
  6. 6.  Ascertainment of Labour Cost  Control of IdleTime  Determining Overhead Absorption Rate  Evaluating Performance of Workers  Determining Performance Bonus
  7. 7.  DailyTime Sheets  WeeklyTime Sheets  JobTickets  Job Cards
  8. 8. DailyTime Sheet Name: Date: Clock Card No. Week No. Machine No. Cost Centre. Work Order No. Description Work Done Time Hours Started Finished Workers’ Signature Foreman’s Signature Cost Office Reference
  9. 9. WeeklyTime Sheet Name: Date: Clock card No. Week Ending: Cost Centre/Department: Day Job No. Description Time Total Hours For Cost Office Start Finish Normal OT Rate Amount Worker’s Signature Foreman’s Signature Cost Office Ref:
  10. 10.  IdleTime is the difference between the time for which payment is made and the actual time worked.  It is the time during which the worker did not engage himself in productive work
  11. 11. Avoidable Causes Unavoidable Causes
  12. 12.  Failure of Power Supply  Breakdown of Machinery  Non-Availability of Material  Strike  Lock-out  Natural Calamities
  13. 13.  Setting-upTime  Movement from Gate to Production Floor  Movement from One Job to Another  Time toTake Instruction  Tea-Breaks  Personal Needs  Minor Accidents  Seasonality of Industry
  14. 14.  Work Carried on Beyond Normal Hours  Double the Rate of Payment  Should be Avoided  Normal Causes OT –charged to the concerned Job or Batch  Abnormal Causes OT-transferred to Costing Profit and Loss account  Only on Proper Authorisation
  15. 15.  Completion of a Rush Order  Meeting a sudden spurt in demand  Completion of a DelayedWork  Making up for Loss of Production due to Accidents, Flood or Other Natural Calamities
  16. 16.  The rate at which the employees are leaving the organisation in a year  Also known as Attrition rate  In IT industry, it was as high as 26-30% in 2007- It has come down to 12-16% in 2009  It is unhealthy for the organisation  It should be reduced as much as possible through constant enquiry
  17. 17.  Separation Rate =  Replacement Rate  Labour Flux Rate 100 ker . X sberofWorAverageNum sLeavingofEmployeeNo 100 ker Re X sberofWorAverageNum placedNo  100 ker Re... X sberofWorAverageNum placementofNoLeavingNo  
  18. 18. Avoidable Causes Unavoidable Causes
  19. 19.  LowWages  Working Conditions  Labour Relation  Trade Union Rivalry  No Job Satisfaction  Lack ofTraining  BadWorking Hours  Lack of Incentives  No Welfare Measures  Lack of Job Security  Unfair Promotion  Supervisory Staff
  20. 20.  Death, Retirement or Disablement  Marriage or Pregnancy in case ofWomen  Better Career Opportunities  Retrenchment  Termination  Change of Place ofWork  Change for BetterWorking Environment  Domestic Responsibilities
  21. 21.  HigherWages  BetterWelfare Measures  BetterTraining  BetterWorking Conditions  Retirement Benefits
  22. 22.  Recruitment Cost  Cost ofTraining  VacancyTime Gap and Loss of Output  AdjustmentTime for the NewWorkers  Loss of Quality  Strain onTools & Equipment  Higher Scarp and DefectiveWork
  23. 23.  Proper Recruitment  GoodTraining  FairWages  GoodWorking Conditions  Labour Amenities  LabourWelfare  Building up Loyalty  Improving the Skills  Improving Relations  Communication of Policies  GrievancesCell  Workers’ Participation in Management
  24. 24.  GuaranteedWage  Uniformity  Connected to CPI  Recognition of Efficiency  Incentive for Hard Work  Equality  Clarity  Progressive Scale  Consistency  Flexibility  Simplicity  Fairness  High Level of Morale  Viability of operation
  25. 25.  Time Rate  Piece Rate  Taylor’s Differential Piece Rates  Halsey’s Incentive Plan  Rowan’s Incentive Plan
  26. 26.  Wages are paid for theTime spent on the job  Output is irrelevant  Rate per Hour. Per Day, or per Month  Suitable when Quality of work is important  Trade Unions prefer this method  Monthly Payment goes with other allowances
  27. 27.  Simplicity  Easier Computation  Encourages Skill Development  GuaranteedWages  Minimum Loss to Material and Equipmnets  Equality ofWages  TeamWork  Cordial Relation among theWorkers  Support ofTrade Unions
  28. 28.  Abilities are not Differentiated  No Incentive for HardWork  Requires Supervision  Dissatisfaction of Efficient Workers  Low Morale  No Punishment for Inefficiency  Labour Cost is not a variable cost under this system
  29. 29.  TotalWages =TT XTR whereTT =TimeTaken TR =Time Rate
  30. 30.  Rate per unit of output  Output decides the wages payable  A standard time is taken and the standard output is determined  TimeWages for the standard output determines the piece rate
  31. 31.  Efficiency is recognised  Motivates the workers  Reduces labour cost per unit  Labour cost is variable  Computation of labour cost in advance is easy  Lesser Supervision  Less IdleTime
  32. 32.  Piece Rate =  TotalWages = Output X Piece Rate dardOutputS TimeWages tan
  33. 33.  Quality suffers  Difficulty of Fixing the standard output and Piece Rate  More scrap and DefectiveWork  Damage toTools and Equipment  No GuaranteedWages  Uncertainty in Income  Trade Unions Oppose the System
  34. 34.  Two Piece Rates: Low Piece Rate and High  No GuaranteedWages  StandardOutput is fixed onTime and Motion Study  Low Piece Rate at 83% of standard piece rate for output below standard  High Piece Rate at 175% of standard piece rate for output above standard
  35. 35.  Increases Efficiency and Motivates the Worker ensuring a high level of morale  Differentiates among workers leading to bad labour relation  Detailed records are to be maintained regarding the output of the workers  Demoralises human values
  36. 36.  For time taken, wages are paid under time rate  A standard time is fixed in advance  For the time saved, 50% of time wages is paid as bonus  Remaining 50% goes to supervisor or management
  37. 37. TotalWages=TimeWages + Bonus =TT XTR + [TS XTR x 50%] where TT =TimeTaken TR =Time Rate TS =Time Saved
  38. 38.  Easy understandability  Guaranteed time rate irrespective of the efficiency  Incentive in the form of bonus for time saved  Workers can evaluate their own performance on the basis of actual time taken against standard time  Management also shares the benefit leading to better investment in tools & equipment
  39. 39.  Quality may suffer  Workers would drive themselves at top speed leading to tension  Lack of team work as each worker will concentrate upon finishing his work at the earliest  Wastage of material and more scrap  Tools would be subject to strain as they may be carelessly handled
  40. 40.  Similar to Halsey’s Plan  Guarantee of time wages  Bonus for time saved  Standard time is predetermined  The bonus is in the proportion of time saved to standard time  Quantum of bonus depends upon the time saved  Management enjoys the remaining value of time saved
  41. 41.  TotalWages =TimeWages + Bonus =TT XTR + [TS XTR X whereTT =TimeTaken TR =Time Rate TS =Time Saved ST = StandardTime ] TS TT

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