Gee MAI: Management Information PPP SS Labour is usually paid via time based remuneration, piecework based remuneration or a mixture of time plus piecework basis. The details of salary/wages paid to an employee is shown on a “payslip® Particulers of Employee + Employee No. + Name + NRIC No. NIC No, + Income taxNo. Caleuletion of Pay Deductions Analysis BASIC SALARY Employee's Deduction 8 (OVERTINE : National insurance ALLOWANCES, : Income Tax BONUS. TOTAL Employer's Deduction Loss: Deductions National insurance Fe National insurance Tolal Deductions Fe Income Tox Amount Due to You ‘Approved By Recelved By Name: Nome Positon + ric Date baie Choque Ne It is necessanfif@4ecord labour times so that accurate data is available for the following reasons: '% To calculate wages/salaries © Toanalyse the times spent for costing purposes; and ® For planning and control purpose. The following methods are used for recording labour times: Clock Cards Aclock card is a document which records the starting and finishing ime for an employee Time Sheets A time sheet is a record of how a person's fime at work has been spent. Job Sheets A job sheet records he number of each type of product that an employee has produced in the period. Prepared by: Jessy ChongTotal Labour Costs Employee Gross Pay Employer's Contributions There are two main methods of calculating the gross pay of employees: TIME RELATED OUTPUT RELATED. Guaranteed minimum wage Time Related Pay Workers will be paid on a period of time worked, reaaidiess ob tne amount of work achieved, The rates can be agreed to be hourly, daily, weekly, monthly or others. % Workers are required to work.for a punter of “normal-working-hours" for which workers are paid at "basic rate”. + For woiking hours in excess ofrnormel working time, arate higher will be paid (Overtime rate} [ei a ney Eee Ovetlimayis time Worked over and above the normal working time. Overtime premium is the extra amount paid to employees for overtime work. Overtime premium is calculated as a percentage of the éxtra hourworked. INWH 40hts x $6 = $240 OT 15hrs x $9 = $135 illustration 7 18a wSa76 Francis, d factory operator, works for o S:hour day tora S days week. For week 3, Francis worked 55, AOUIS, Francis is paid at basic hourly rate of $6 and overtime premium is set at 50% of basic. Calculate total pay to Francis for that week. Illustration 2 Hanson, a factory worker, works for a 7-hour day for a § days week. For week 4, Hanson worked 43 hours. Hanson is paid at basic rate of $8 per hour and overtime pay is at 1.75 of basic. Calculate total pay to Hanson for that week. OT tale = 1.75 x $8= $14 (NR $8: Premium $6} Prepared by: Jessy Chong NWH 38hrsx $8 $280 Hz OT ahs x $14 $112 Total $392MAI: Management Inf ustration 3 Given below are the labour costs incurred by a manufacturing business for the week commencing 23 May 2010. % Direct production workers 1,200 @ $6.00 per hour © Direct production workers overtime hours 250 hours @ $9.00 per hour NR $6; Premium $3 ® Indirect workers 300 hours @ $5.50 per hour @ Indirect workers overtime hours 50 @ $7.50 per hour Of the hours paid to the direct production workers 40 of these were idle time hours, What is the total for direct labour and indirect labour for the week? liistretion 4 NWH 680; OT 150; Idle 70 During the week ending 28 Feb 2010 the direct production workers in a factory works for 900 houts in total, Of these 70 were idle time hours and 150. were overtime houss,.The hourly ratelet pay is $6.00 with overtime hours being paid at atime and half. 1.5 x $6 = $9(NR 6 Premium 3) During the same week the indirect workers worked for 150 hours at a Tate!6F $5.00 per hour with no overtime hours, What is the direct labour cost and the indirect labour cost for the week? Illustration § Given below ate the labour costs incurred by a manufacturing business for the week commencing 1 June 2010. ® Direct production workets 1,100 @ $2.00 pet hour Direct production workers overtime hours 120 hours @ $5.00 per hour NR 3: Premium 2 Indirect workers 200 hours @ $2.50 per hour Indirect workers overtime hours 30 @ $480 per hour Of the hours paid to the ditect produéfion weikers 70 of these were idle time hours. What is the total for direct labour and indirect labouriior the week? + ° ° * Employee is paid according to output achieved. This is sometimes called piecework rate. The payment of a fixed sum per fixed unit produced, regardless of time taken. Illustration & DAMES Lid operates a piecework system for remuneration of its employees. Each good output produced by employee is paid at the piecework rate of $1.80 per unit. Wayne produced 687 units during week 9 of which 32 unils are defective, thus rejected. Calculate the salary payable to Wayne. 655u x $1.80= $1,179 Prepared by: Jessy ChongDifferential / Incremental Piecework Under this method the piece rates vary at different levels of efficiency. The aim of this method is to provide incentive to increase output so as to reach the maximum production. ilustration 7 Kitty produced 188 units of output. The rates paid will be as follows: Up to 100 units per day 50¢ perunit —*Fitst_ 1004 x $0.50 $50 101 ~ 150 units per day 60¢ per unit Next 50u x $0.60 $20 151 ~ 200 units per day 70¢ per unit Last 38 x$0.70 $26.60 What will be her gross wage? Total ilustration 8 Payments by results rates for an organization are as follows: Up to 100 units per week $1.20 per unit 101 to 150 units per week $1.35 per unit 15] to 200 units per week $).50penunit James produced the following quantities for the lastiihree weeks: Week 1 94 units Week 2 18? Units Week3 123 units Calculate the wages payable to James for Week 1. 2.and3. Piecework Scheme with Guaranteed Minimum Wage This method quaranteed d day fate. Ifthe piece tate eaintgs fal below the day rats eaininas, the day rate eamings are paid instead. Therefore, workets are™ipaid @ gUsranteed minimum and not penalized on account of low production through(éireumstdnces (say, poor materials) beyond their control Illustration 9 Kittys@illbe(paid @.quaranteed minimum of $40 daily. The rate per unit is $1.00. What will be her wage if she produces 32 units? $40 What will be her wage if she produces 45 units per day? $45 iiéstration 10 SHOGUN Ltd is paying its employees at piecework tate of $1.25 per output achieved on daily basis. Theré’is 6 guaranteed daily wage of $28 per day. For a five-working-day period, Simon achieved production output of 18, 23, 28, 15 and 30 units. Calculate Simon's salary for the entire week. Prepared by: Jessy Chong iManagement Informati Employee's gross pay $200% Less: PAYE (8x0) Less: employee's NIC ($ xx) Employee's Net Pay ‘$1000 Employee's gross pay $200% ‘Add: employer's NIC $0 Total Labour Cost $1000 deducted from gross wages payable. Employers Merely collect the fax on behalf of the goveinment. National Insurance Contribution (NIC) may claim benefits from the state in future. For example: unemployment benefits, income supportystate pension scheme, national health veal ‘henee, in 2 pars: @ The part that have to suffer>deduet from their pay ‘has to suffer— noth iuctible from worker's pay. FParliol the [ebour Cost llustration 11 An employee's gross income was $370. Thellincomal#aK te be deducted under the PAYE system was $37 and employee's National insurange Contributions for the week were $30. The employer's National insurance Contributions were aa i, What is the employee's net pay? Total gross income - PAYE - Ee’s NIC = $370 - $37 - $30 = $303 i, Whats the total labour cost for the employer? Total gross income + Ers NIC = $370 + $40 = $410 Illustration 12- Pilot Paper, ‘A production operative is paicl $11.00 per hour for a basic 36-hour week. Overtime is paid at 40% 1404 $1) gle-d Raa Ol Sri bade ioe. the operative worked York Kaui in week 9, Income tax deducted was $75.dg1an Benelieentibution payments were: Employer $40 Employes: 10% of gross pay 10% x $431.20 What wéis the net pay of the operative in week 9? BR “s2r1.c8 NWH ashisx $11 $385 8 xe OT — Shisx $15.40 _ $46.20 331620 Total Gross ee PAYE a) 19. 8 seize Ee's NIC ($43.12) Total Net S11. chongsk818.blogspot.com Prepared by: Jessy Chong 21aMAI: Managem: + =e 5: Change of Remuneration Method ‘A business makes one product which is made on by re employes. In the past, thal] | BRBIGYESS have been paid at an heute ee each week dhe-any overime hotrs re paid atthe rate SPAS GAal halt In a a week the employees would: each work forleWeHtimelhOUBand on average produced(MJOGOURIBof the product each week, | In an attempt to improve productivity the management have decided |e éhonge tno! remuneration package to a plecework system where each employee will be paid af théyrate of | produced and §2186) per unit for any. units produced evapand It's anticipated that each employee wil produce(MTOURIB per week, | indet the hourly rate system and under he Biacammmmmnstern?_ J ‘otal labour costs/ Total production units Labour cost per unit Increase in Productivity ‘A business has a factory in which the OlemplayeesiGre paidhat cn hourly rate off§IBOpErhourt for | a BSiRoUrWweEk, a «- paid at tate of §@i60)per hour. Each unit of the product | 4 takes an average of fo produce and, in an average week each of the employee works(@) | nour of EHH. | In on attempt to improve producti¥ily the men@gement is considering investing some new | machinery which it is cnticipatediwill reduce the time required for each unit By | hoped that there will now be.no overtime worked, What is the effect on the/fotal labour cost and the labour cost per unit of th 120min - 15fnin = 105min/é0min = 1.78his Ledger Accounting for Labour Costs Total gross income $15,000+$4,000 = $21,000 ‘Réusiness Paidits employees net pay of $15,000 for week 3. This was alter deductions for PAYE and | Nation@l Insurance Conttibutions (NIC) of $6,000. The direct element of this was $18,000 and the | incirectlabour cost was $3,000. | Labour ofe POH a/c Gross income$21,00q WIP $18k labour $18k labour $3k POH $3k Prepared by: Jessy Chong iMAI: Management Inf = =— Performance Measures Labour Efficiency period Efficiency is the (BIGHOREAID) between actual productivity in a given -BeHes and the standard amount that should be produced in that time. It can be measured by means of an efficiency ratio: S/A ___ Actual output measured in standard hours Not possible to determine from the information provided 12. Which of the following formuloe can be used for calculating labour efficiency Ratio? A Actual hours + standard hours of actual output B Budgeted hours = actual hours Standard hours of actual output + actual hours D Standard hours of actual output + budgeted hours 13, Production labour costs incurred during a period includedthe following items: Q) Salary of Faeteryinanagen $2,400 (2) TRMIRIAgloF direct workers $1,660 (3) Normallidie'time) $840 G) — OvertimelpEInIUMS of direct workers $2,760, ©) Overtime hours of direct workers at basic. nate $9,200 What total amount would usually be charged to\production overhead for the above items? A $4,060 B $4,900 © $7,660 D $16,860 Prepared by: Jessy Chong5. 10. A business employs two grades of labour in its producti n department. Grade A workers are 10 + Premium $5 considered direct labour employees, and are paid $10 per hour. Grade B workers are considered indirect employees, and are paid $6 per hour. In the week just ended, Grade A labour worked 30 hours of overtime, 10 hours on a specific customer order at the customer's request, and the other 20 hours as general overtime. Grade B labour worked 45 hours of overtime, as general overtime. Overtime is paid at time-and-one-half, What would be the total amount of pay for overtime worked in the week that is considered to be(dineetlabauneast 1° The total labour cost for an employer is the _giosyBay plus the employer's NIC The employer must deduet PAYE ond _omploye'siNic. from the gross pay before paying the net pay to the employees. The hours worked are often recorded on clock card job card or time sheets The gross pay is debited to the wages contral account and the direct cost element is then transferred to the WIP account whilst the indirect cost element is transferred to the __ Production Overhead ‘ccount, Hourly paid workers are generally paid a_notmalrate per hour with a premium for overtime hours, Clock ‘card PAYE employee's NIC Work-in-Progress Premium job cards gross pay normal rate Employer's NIC time sheets Production Overhead Prepared by: Jessy Chong