What are the differences between idle time and overtime in cost accounting?

For enforcing regularity, discipline and ensuring daily requirement of labour force in the factory. If it is due to shortage of labour, steps may be taken to recruit more workers. Coordinated purchasing of raw materials and necessary supplies. If a job requiring one material is about to be finished, the purchasing department should be prepared to have the materials for the next job.

The basic piece rate is applied to those workers who produce below 83% of the standard output. In cases where the performance level is 83% to less than 100% of standard output, 110% of the ordinary piece rate is applied.

Labour Cost Control – Group Bonus Schemes: Meaning, Conditions, Advantages, Disadvantages and Important Group Bonus Schemes

Emerson used 32 different rates of bonus at different levels of efficiency between the range of 66 2/3% and 100%. Overtime premium is paid for extra shift work, performance of hazardous task and work beyond normal hours.

• These costs often add up to as much as 30% to 40% of base pay.
• This system should be strictly adhered to.
• It encourages efficiency among workers by inducing hem to finish their job before the standard time.
• Since, abnormal idle time is controllable, the cost of abnormal idle time due to any reason should be charged to Costing Profit & Loss Account.
• To give an example of how the cost of idle time is handled, assume that a press operator earns $12 per hour.

A worker whose work tails just short of the standard would lose very heavily. It develops Idle time vs overtime in cost accounting? a sense of partnership and as such workers try to increase productivity.

Labour Cost Control – Time Keeping: Meaning, Objectives and Methods

Idle time can be reduced by proper maintenance, production planning, and timely acquisition of raw materials and necessary supplies. Halsey this scheme, an hourly rate is guaranteed to all https://business-accounting.net/ workers. Generally, the amount of bonus or premium payable to the workers is one-half (50%) of the wages of the time saved. However, a company can increase or decrease the rate of bonus.

The employer must decide in both cases the level of wage cost in his organisation. Bonus is paid based on output of the department, improvement in quality of the product, savings of expenditure or time, reduction of labour turnover, reduction of scrap and waste, etc. The range of such incentives is very wide. The objectives of such incentives are to keep the workers happy, contented and in better health for increasing productivity. The incentives make condition of employment more attractive, encourage loyalty, minimise absenteeism and labour turnover.