Labor • This is the cost, incurred in the form of remuneration paid to the employees or labor of the organization. The workforce required to convert material into finished product is called labor. It can be direct or indirect. • Direct Labor • The portion of wages and salaries which can be identified and charged to a single cost unit • Indirect Labor • Cannot be directly related with the production of specific goods or service. Ex: Foreman, storekeeper, time keeper etc. Departments involved in labor cost control and reduction I. Personnel Department II. Engineering Department III.Time Keeping Department IV. Payroll Department V. Cost Accounting Department

1. LABOUR COSTS
COST ACCOUNTING

2. Labor
• This is the cost, incurred in the form of remuneration paid to the employees or labor of
the organization. The workforce required to convert material into finished product is
called labor. It can be direct or indirect.
• Direct Labor
• The portion of wages and salaries which can be identified and charged to a single cost
unit
• Indirect Labor
• Cannot be directly related with the production of specific goods or service. Ex:
Foreman, storekeeper, time keeper etc. Departments involved in labor cost control and
reduction
I. Personnel Department
II. Engineering Department
III.Time Keeping Department IV. Payroll Department V. Cost Accounting Department

3. Records regarding Labour costs
1. Time Keeping records
• In time keeping system, maintaining record of each worker’s time in and time out during regular
working period .In this basic aim is responsible for recording the attendance time of each worker
accurately.
• Methods of time keeping:
• Clock cards
• Disc Method
• Attendance Records
2. Time Booking records
• In time keeping system ,maintain the records of each worker’s productive time spent by the workers
in the factory.
• Methods of Time Booking :
• Daily Time Sheet
• Weekly Time Sheets
• Job Ticket
• Labor Cost Card
• Time and Job Card • Idle time card

4. Wage Systems
• A system of wage payment, which takes care of both, i.e. providing guarantee of
minimum wages as well as offering incentive to efficient workers helps to motivate the
workers to a great extent.
• The following are the various methods of payment of wages • Remuneration on Time
basis
• Remuneration on Piece work
• Bonus Systems
• Indirect Monetary Incentives (Profit Sharing, Co-partnerships)
• Non monetary incentives like job security, social and general welfare, sports, medical
facilities etc. Remuneration on time basis
• The wages is measured on the basis of unit of time i.e. hourly, daily, weekly or monthly
• The formula is as follows: Earnings = Hours worked * rate per hour Example: If a
worker is paid $10 per hour and has spent 300 hours during a particular month in a
factory, his wages will be 300*$10 = $3000

5. Remuneration on time basis 01
.Flat Time Rate (Ordinary Level):
• Under this method, rate of payment of wages per hour is fixed and payment is made accordingly on
the basis of time worked irrespective of the output produced 02.High wages system:
• In this system, workers are paid at time rate but the rate is much higher than that is normally paid in
the industry or area. In this method, overtime is not normally allowed 03.Graduated Time Rate:
• Under this method payment is made at time rate, which varies according to personal qualities of the
workers. Advantages
• It is simple and easy to calculate
• It provides a regular and stable income to the worker and thus creates a sense of security
• It is beneficial to the average as well as the below average workers
•Disadvantages
• This leaves no incentive for an efficient worker. An inefficient as well as efficient workers are paid the
same wages under this method
• Since the orders are certain about their wages they may consume more time for producing the same
quantity

6. Remuneration on piece work
• Under this system, wage are paid on the basis of production
• The formula is as follows: Earnings = number of unit produced * rate per unit
Example: If a worker is paid $15 per unit and he produces 20 units in 7 hours the
total wages will be calculated as 20*$15 = $300 Remuneration on piece work 01.
Straight Piece Rate:
• In this method, rate per unit is fixed, This method thus offers a very strong
incentive to the workers 02.Differential Piece Rates:
• Under these methods, the rate per standard per hour of production is increased as
the output level rises. In other words, a worker is paid higher wages for higher
productivity as an incentive,