ACCOUNTING Chapter IV FOR LABOR COST Learning Objectives: At the end of this chapter, the reader shouldbe able to: a. enumerate and explain the different procedures in controlling labor cost; b. statethe provisions of the labor code with regards to regular workinghours and premiums for working on overtime, holidays, special days and on rest days; ©. explain the use of clock cards, time tickets and daily time report and their importance in controlling labor cost; d. prepare weeltly job time recapitulation and payroll; and, e. make the corresponding entries based on payroll and the weekly job time recapitulation. 3 ae anaes eos100 Chapter IV CHAPTER IV ACCOUNTING FOR LABOR COST The element of labor cost in production is as important as the element of materials and in some instances, even exceeds the latter in importance. An effective control of labor cost brings about production efficiency and conse- quently, lower production cost per unit. It poses @ perennial challenge to management because of economic and psychological factors such as changes in production goals and in job specifi¢ations arising from technological and organizational changes, the rising cost of living, wage rates and employees’ benefits, the inherent weaknesses of human beings, and the different person- alities involved. Labor Cost Control Defined. Labor cost control refers to keeping track of labor costs in total and per unit, comparing them with predetermined figures and adopting prompt remedial measuresin case there are variances. Departments Involved in Labor Cost Control. The departments involved in labor cost control are production planning, personnel, time and motion study, budgeting, timekeeping and accounting, Procedures in Labor Cost Control Labor cost control requires (a) production planning, (b) use of labor standards and budgets, (c) labor performance reports, and (4) appropriate compensation including wage incentive systems. Production Planning. As applied to labor cost control, production planning starts with an intensive study of the product design and the manufacturing processes involved and scheduling production runs way ahead of time. The product design and the nature of manufacturing processes involved serve as a basis in determining the kind of human resources required in production. Production schedules supported by labor hour requirements indicate when workers would be needed and what type of skills they must have. The personnel department sees to it that the required number of qualified workers are available on the dates they are needed by the production department. Use of Labor Budgets and Standards. Labor standards in terms of output per labor hour or per day (or allowed number of hours per unit) are established after an intensive study of the product design and the manufacturing processes involved and after conducting time and motion studies. The standards are used in preparing labor budgets and in measuring performance, The budgets for labor hours and labor cost are prepared based on budgeted production volume, allowed number of hours per unit and the corresponding labor rate per hour. The budgeted production volume, in turn, is based on budgeted sales volume.Accounting for Labor Cost 101 Example: Theproduction goal for January is 20,000 units and the standard output per labor hour is 5 units. The budgeted number of labor hours must. be 4,000 (or 20,000 units/5). Assuming an hourly rate of P20, budgeted labor cost must be P80,000. Ifa direct worker is able to putin 160 hours in one month, 25 direct workers (or 4,000 hours/160) are needed to produce 20,000 units in one month. ‘ The number of indirect workers depends on the volume of work to be done and the desired ratio of indirect workers to direct workers. The number of foremen depends on the degree of supervision to be exercised over the workers. Labor Performance Reports. Labor performance reports may be prepared on daily, weekly or monthly basis depending on the level of management to which they are submitted and the nature of the manufacturing processes involved. The factory super- intendent should have production data on daily basis to be able to direct manufacturing operations in accordance with plans. For the middle management, weekly production reports may suffice. Labor performance is generally compared with standards previously set. Based on the example in the preceding section wherein the standard output per hour is five units, assume that one-fourth hour is allowed per unit. Only 4,000 hours are allowed to produce 20,000 units. If 20,000 units are produced in 4,200 hours, the labor time (or efficiency) variance must be unfavorable Appropriate Compensation Including Wage Incentive Systems. Labor rates and fringe benefits are established based on existing labor laws, collective bargaining agreement, and prevailing rates and practices in an industry in the specific locality. An incentive wage system is adopted to increase a worker's take home pay and at the same time reduce labor cost per unit. It works in such a way that fixed oyerhead is absorbed by an increased number of units thereby resulting in a lower product unit cost. Example: The daily rate for each of the ten workers in a factory is P140 with standard output at 20 units or at P7 per unit, Fixed factory overhead per day is P400. An incentive system pays P7.50 for every additional unit produced. If each worker is able toproduce 25 units in one day, heis paid a total of P177.50 (or P140 plus units @ P7.50). Although the average labor cost per unit is at P7.10, (P177.50/25), fixed factory overhead per unit goes down from P2 (or P400/200 units) to P1.60 (or P400/250 units). Sometimes incentives are in the form of bonuses or in kind depending on what would encourage the workers more to improve productivity. Accounting for Labor Cost Accounting for labor may be divided into three phases, namely, timekeeping, financial accounting and cost accounting. Timekeeping. This is concerned with the determination of total number of hours worked by an employee and how this total is accounted for. The total number of hours worked is used as basis in payroll preparation. How this total is accounted for serves as the basis in making the corresponding charges to the different jobs (or processes) worked on. Financial accounting phase —This involves payroll preparation and the keeping of records of employees’ earnings, deductions, payment of salaries and wages and the different payroll-related liabilities,102 Chapter IV WEEKLY CLOCK CARD. 1 112:02/12:58 | 5:10 1 5:58 am | mmm fan 112:00! 1:00 | S108 Total regular hours Overtime hours TIME TICKET Employee No. 5 F Hours worked: IHourly rate: tLebor cost: ificcount to be Icharge: 1a r Se Accounting for Labor Gost 103 Cost accaunting phase —Thisis concerned with the allocation of the payroll charges to the different jobs, departments or to overhead based on the nature of work done by the employees. Direct labor hours and their cost are entered on the respective Job order cost sheets (usually on weekly basis) and indirect labor costs are entered on the analysis sheet (or subsidiary records for Manufacturing Overhead Control). Forms Used in Controlling Labor Cost. The following forms are used in controlling labor cost: Clock Card (or Time Card). This shows the time an employee reports for work and goes out and is used in payroll preparation. It is so called because it is punched in with the use of a time clock (or time recorder). In companies wherein control of manhours is computerized, the employees use their identification cards in punch- ing in and out. It serves as evidence for labor time purchased or that payment is being made only for manhours expended within the company. Time Ticket (or Job Ticket). This shows the number of hours a worker devotes to a certain job (or his accomplishment on that job) during a day so that it serves as a primary basis in making charges to direct labor cost of the jobs worked on. Ifa worker works on four different jobs on one day, he must accomplish four time tickets for the particular day. Daily Time Report. This shows how a worker spends the total number of hours timed-in for a day. In others words, it is the report on which he accounts for the number of hours he is being paid. DAILY TIME REPORT Employee No, Department: Date: Nature of work: Name: JOB NO. START FINISH TIME WORKEDpuosey s6urtie3 ¢.eehorcus *o9 SNTEALSHSMNEN SBATIS 104 Chapter IV 13aMs “TosuaAccounting for Labor Cost 105 Payroll Sheet, This shows how the employees? net pays are arrived at. It provides columns for regular pay, overtime pay, deductions and net pay. It may also serve as evidence for payroll payment by providing a column for workers’ signatures upon receipt of the amounts due them. Employees’ Earnings Records, These show the periodic and accumulated earnings of each employee aside from the payroll deductions made. The earnings records are used in the computation for fringe benefits that the employees may be entitled to and in reporting taxes withheld. Employees are being paid weekly (for daily wage earners) and twice a month (for those paid on monthly rates). Per Book III Rule No. VIII, Section 3 of the Labor Code: Wages shall be paid not less often than once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days, unless ” payment can not be made with such regularity due to force majeure or circumstances beyond the employer's control, in which case the employer shall pay the wages immediately after such force majeure or circumstances have ceased. ‘The timekeeping department collects and controls clock (or time) cards and job tickets (or daily time reports). The number of hours timed in per clock (or time) cards is reconciled with that per time tickets or daily time reports. If the clock card shows more hours than the daily time reports (or time tickets), the difference is unproductive hours and is charged to-factory overhead. If the daily time reports show more hours, the supervisor and the worker are consulted to correct the error. The time cards and daily time reports (or time tickets) are subsequently forwarded to the accounting department for payroll preparation and for entries to cost sheets, respectively. ‘The accounting department prepares the payroll based on time (or clock) cards. The number of hours devoted to jobs are posted to cost sheets. Example: Jose Dizon, a worker with daily rate of P160, timed in a total of 45 hours for the week May 2-8, His daily time reports show that during the same week, he accounted for the 45 hours as follows: Job order 656 — 12 hours 671 - 10 675 - 5 679 - 15 Waiting time — _3 45 hours ‘The gross pay of Jose Dizon for the week and the corresponding charges would be as follows: Gross pay: 45 hours (P160/8 hrs) Charges: Direct labor: 42 hours x P20 = Idletime 3 hours x P20 0 es is is ‘The 42 direct labor hours are entered on the correspondingjob order cost sheets and the 3-hour idle time is charged to factory overhead.106 Chapter IV Regular Holidays, Special Days Per Executive Order No. 203 (June 30, 1987), there are ten (10) regular holidays and two (2) special days and they are as follows: Regular Holidays: New Year's Day ~ January 1 Maundy Thursday © — Movable Date Good Friday — Movable Date Araw ng Kagitingan — April9 (Bataan and Corregidor Day) Labor Day ~ May1 Independence Day — June 12 National Heroes Day = Last Sunday of August Bonifacio Day = “November 30 Christmas Day = December 25 Rizal Day = December 30 Nationwide Special Days: All Saints Day — November 1 Last Day ofthe Year — December 31 ‘The pay rates for work done on regular holidays and special days differ as stated in the following sections. Computation for Daily Rate. The daily rate, for employees whose rates are stated on monthly basis, is computed as follows: Monthly rate x 12 months Daily rate = 365 days Thus, the rate per day of an employee with monthly salary rate of P5,000 must be P164.38 or [P5,000 x 12 months)/365 days]. ‘ Premium Pay € Premium pay refers to the additional compensation for work performed within eight (8) hours on non-working days (such as rest days and special days) as required by law. The premium pay rates are as follows: Rate of Pay, For Work Performed on Rest days. 130% Special days 130% Rest day which is also a special day 150% Regular holiday 200% Regular holiday which is also a rest day 260% (200% x 130%)Accounting for Labor Cost 107 . _ Based on the foregoing rates, the amount earned by a worker with daily rate of P200 and who works for eight (8) hours only in one day shall be as follows: Onearest day: P200x 130% P260.00 On a special day: 7200 x 130% 260.00 On a rest day which is also a special day: P200 x 150% 300.00 On a regular holiday: P200 x 200% 400.00 On a regular holiday which is also a rest day: P200 x 260% 520.00 Normal Hours of Work, Overtime Work, and Overtime Pay The Labor Code ofthe Philippines (Presidential Decree No. 442, as amended) states that thenormal hours of work ofany employee shall not exceed eight (8)hours.a day (Art, 83). Work performed beyond eight (8) hours in one day is considered overtime work and the employee is entitled to overtime pay of at least 125% (Act. 87). Thus, an employee with daily rate of P200 who works for then (10) hours on a working day is entitled to at least P262.50 computed as follows: For regular eight (8) hours 200.00: For overtime work of two (2) hours ‘P200/8 hrs, x 125% x 2 hrs. 62.50 Total earned for ten (10) hours 262.50 With a daily rate of P200, the hourly rate is P25 (or P200/8 hrs.) so that the overtime premium per hour must be P6.25 (or P25 x 25%). The amount earned for ten (10) hours may also be arrived at as follows; Ten hours at the regular rate of P25 Overtime premium pay (2 hrs. x P6.25) Total earned for ten (10) hours The treatment for overtime premium depends on the reason for overtime work. Refer to-the section on Accounting for Overtime Premium. Overtime work rendered on a scheduled rest day, a special day or a regular holiday is entitled to overtime premium of 30% based on the hourly rate he is entitled to on that particular day. Per Labor Code of the Philippines (Art. No. 87), work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent totherate of the first eight hourson a holiday or rest day plus at least thirty percent thereof. Thus, the overtime rates may be summarized as follows:108 Chapter IV For Overtime Rate of Pay, Based _ Work Performed on on Regular Rate Working Day 125% Restdays (130% x 130%) 169% Special days (130% x 130%) 169% Rest day which is also a special day (150% x 130%) 195% Regular holiday (200% x 130%) 260% Regular holiday which is also a rest day ; (260% x 130%) 338% Based on the foregoingrates, the amount earned forten (10)hoursby a worker(with daily rate of P200) must be as follows: Overtime , Regular Amount Work Performed Pay Premium Earned On a rest day: (130% x 130%) x P25] x 2 hrs. = 84.50 P260 ‘P344.50 On a special day: [(130% x 130%) x P25] x 2 hrs. = 84.50 260 © “344,50 On a rest day which is also a special day: _ (150% x 130%) x P25] x 2 hrs. = 97.50 300 397.50 On a regular holiday: {200% x 130%) x P25] x 2 hrs. = 130.00 400 530.00 On a regular holiday which is also a rest day: [260% x 130%) x P25] x 2hrs. = 169.00 520 689.00 In accounting for labor cost, whatever amount is earned by the worker for ten (10) hours minus his pay at regular rate of P250 (or 10 hours x P200/8 hrs.) is treated as overtime premium. Undertime not Offset by Overtime. When an employee works undertimeon one day and then works on overtime on another day, he is entitled to overtime pay for the latter, Undertime work on any particular day shall not be offset by overtime work on any other day. (Art. 88) Absence before a Regular Holiday. The Labor Code (Book III Rule IV, Section 6) states: Employees who.are on leave of absence without pay on the day immediately preceding a regular holiday may not be paid the required holiday pay if he has not worked on such regular holiday. Accounting for Premium Pay and Overtime Premium Overtime premium is defined as the additional monetary compensation given to employees for working beyond the eight-hour period set as limit by law. However, for aceounting purposes, all premiums (or the difference between amount earned and a worker's pay at regular rate) are treated as overtime premiums. They may be charged either todirect labor cost or to factory overhead depending on the reason for the overtime work.Accounting for Labor Cost 109 ‘The premium is treated as direct labor cost when overiime work is due to the rush nature of a job. When a contract for a rush job is accepted, it is with the foreknowledge that overtime would be necessary so that the price charged to the customer should include the overtime factor in the calculations. The premium is treated as factory overhead when overtime work is due to greater volume of work, slow production or inadequate plant eapacity. In this eases, it would be unfair to charge it to a job that happens to be in process during the overtime hours. The overtime premium should be reflected in the predetermined factory overhead rate by including the corresponding provision in calculating for the same. Example:Job No. 605 for 12 dozens ofbaby dresses has been accepted and required delivery date is May 12th. Tithe order was received only a few days before the required delivery date so that itis rush in nature and overtime work i anticipated, the premium is adirect charge to the job. If the order was received a reasonable number of days before required delivery” date but has to be worked on overtime because of unusually heavy demand, slow Production or inadequate plant capacity, the premium is charged to factory overhead. Payroll Deductions ‘The deductions from gross pay or amount earned by employees are income taxes withheld and the contributions to the Social Security System (SSS), Medicare, and Pag- IBIG Fund. Occasional deductions are labor union check-offs (or union dues) and collection of receivables and advances, Payroll Preparation ‘The payroll is prepared based on clock (or time) cards, authority granted to work on overtime, and required payroll deductions, ILLUSTRATIVE PROBLEM ‘The following information is given for the payroll period, May 8 to 14: Hours Timed In Hourly Monthly May 8-14 WH Rate Barnings Regular Overtime Taxes Magno, Josue Foreman P40 P7,800 48 P160 Abcede, Claro Worker 30 5,800 40 120 Benin, Carpio Worker 28 5,400 43 110 Carlos, Ben Worker 28 5,500 46 3 100 Khan, Mario Worker 28 5,300. 45, 2 100 Paterno, Lucio Worker 28 5,000 AT 4 90 The time tickets, as summarized, show the following number of hours expended on the different jobs:140 Chapter IV 2 Sob Number 321 335 338 341 Regular OT RegularOT RegularOT Regular OT Magno, Josue Abcede, Claro 15 18 5 Benin, Carpio 6 12 20 Carlos, Ben 18 19° 3 8 Khan, Mario 10 12 2 10 2 Paterno, Lucio 1 16 15 7 Carpio Benin did some errands per request by the foreman for four (4) hours. Mario Khan did some repair work for eight (8) hours. Overtime pay is 125% of regular time pay and overtime work is due to the greater volume of work. Deductions are for withholding taxes and the premiums for SSS, Medicare and Pag-IBIG (sce schedule) are made from the second week’s payroll of each month, ‘The weekly job timerecapitulation, the computations for gross pay, the payroll, and the corresponding entries are shown on the next page. Income Taxes Withheld ‘These are the estimated income taxes that employees are expected to pay based on their earnings and personal exemptions and are deducted from their pays. Schedule of taxes to be withheld are provided by the Bureau of Internal Revenue (BIR). The Social Security System The Social Security System was created per Social Security Law (Republic Act No. 1161), Its mission statement isto provide meaningful protection tothe membersand their families against contingencies resulting in loss of income or financial burden and to contribute to the socio-economic development of the country through a viable social insurance program. The programs it administers and the corresponding benefits are the following: The Social Security Program. It provides sickness, maternity, disability, retirement and death benefits and financial assistance in the form of salary, stock investment, and privatization fund loans. The Employees’ Compensation Program (EC). It provides double eompensa- tion to workers when the illness, death or aceident occurs during work-related activities, Coverage is compulsory for all employees not over sixty years of age and their em- ployers and for the self-employed. Contributions to the Social Secarity System are made based on monthly salary credits and are in accordance with the schedule given on Appen- dix A. 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"Say doge qt SPT 1 39e4rPUT) 39847G | S4eqgunN gor 1 266 ‘PI- 8 few Get se Ina Fdeoey eur, qop Atyeen 112 Chapter IVAccounting for Labor Cost 113 schedule provided by the SSS. All contributions are remitted to the SSS within ten (10) days after the covered month (per Guidebook for SSS Members as issued by the SSS, page 20). The Medicare Program The medicare program provides for hospitalization and medical benefits. It was originally being administered by the SSS but in 1997, it was privatized and its admin- istration was taken over by the Philippine Health Insurance Corp. or PhilHealth. The schedule of deductions is given in Appendix A. Pag-IBIG Fund Contributions Pag-IBIG is the acronym for Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno, Primarily, the fund was created in 1978 (as the Home Develop- ment Mutual Fund) to address two of the nation’s basic concerns; generation of savings and provision of shelter for workers. In effect, Pag-IBIG hamnesses the four sectors of our society (as given above) to provide its members with adequate housing through effective savings scheme. Both employee and employer contribute to the fund with the latter’s contribution credited to the name of the employee so that the employee's savings immediately double or triplein amount, Theschedule of contributions tothe fund isgiven below. Employee’s Monthly Employee’s Employer's Earnings Contributions Contributions P 1,000 1% P10 2% P 20 1,500 1% 15 2% 30. 1,600 2% 32 2% 32 2,500 2% 50 2% 50 4,000 2% 80 2% 80 5,000 2% 100 2% 100 6,000 100 100 10,000 100 100 A member employee may withdraw his savings upon membership maturity, disability, permanent departure from the country, separation from service or death. Aside from these, members may avail of short-term (multi-purpose or livelihood) and housing loans at low interest rate. For sometime, membership in the fund shifted back and forth from mandatory to voluntary until President Fidel V. Ramos made it mandatory effective January 1, 1995 for SSS and GSIS (Government Service Insurance System) members with monthly compensation of 4,000 and above. At the time of this writing, contributions are 1% for workers with monthly compensation of not more than P1,500 and 2% for those with monthly earnings of more than P1,500 with maximum fund salary at P5,000. The employer's counterpart contribution is fixed at 2% with maximum amount set at P100 or based on the maximum fund salary of P5,000.144 Chapter IV ASSIGNMENT MATERIAL Questions: 1, What procedures are involved in labor cost control? Explain each. 2, An increase in labor cost oftentimes results in an increase in factory overhead. Explain. 3, Inadequacy of records pertaining to labor cost may be an irritant in the labor- management relations. Explain, 4, The hiring of a factory worker increases factory cost by an amount that exceeds his basic pay. Explain. 5. When may premium pay be treated as additional direct labor cost and as factory overhead? EXERCISES Exercise 1: Theory Match the following terms with the phrases given below: Time and motion study Time ticket Financial accounting phase Daily time report in labor cost control Payroll sheet, ‘Timekeeping Earnings record Cost accounting phase Payroll check in labor cost control Incentive system Clock card a. Itis concerned with the total number of hours worked by each employee and what a worker does each hour he is being paid. b. It provides for additional financial compensation to workers and at the same time reduces the fixed overhead cost per unit. ¢. It shows how each employee's net pay is arrived at by providing columns for gtoss pay and deductions aside from net pay. d. It shows the number of hours a worker has devoted to a job during a day. e. Itisconcerned with the determination of the breakdown of the payroll and the making of labor cost entries on cost sheets or production reports. f, Itis concerned with the determination of how much to pay each employee and the keeping of the earnings records. g. Different tasks are observed and analyzed to eliminate unnecessary motions and set the standard time for the performance of each task. h. It shows when the worker reports for work and when he goes out and is used as basis in the computation of his gross pay.Accounting for Labor Cost 115 i, Itis used by a worker in accounting for the total number of hours timed in for a day. j. It shows the different amounts earned by an employee for a period and the deductions made therefrom. * Exercise 2: Estimated Labor Hours and Required No. of Workers Five hours of labor are allowed per unit of a product at the rate of P30 per hour. Budgeted production volume for June is 25,000 units. Total regular working hours for June is 160 per worker. Whatisthe estimatednumber of labor hours required to produce 25,000 units? How many workers must be made available for the production in June? How much must be the budgeted labor cost for June? Exercise 3: Effect of Wage Incentive System on Fixed Factory Overhead per Unit ABC Corp. pays its workers at the rate of P200 per day plus P21 for every unit produced in excess of 10 units during each working day. The produetion report for two days show: Worker Monday A 8 units 9 units B 10 12 ¢ 10 15 D 10 10 E 10 1 An analysis of overhead shows that fixed overhead per day is more or less P800. Required: : a. The amount to be paid to each worker and the average labor cost per unit for each day. b, Fixed overhead per unit for each day. _ Exercise 4: Theory Determine whether each of the following statements is true, Explain your answer if it is false. a, The control process begins with product design and continues as a cooperative activity until the product is sold. b. Aclock cardisa record oflabor time purchased while atime ticket or daily time report is a record of performance received. _ ¢. When the number of hours per daily time report is less than the number of hours timed in (per clock card), the difference is treated as unproductive time and is charged to factory overhead. 4. Overtime premium is treated as a direct change to a job when overtime work is due to greater volume of, or slow production.4146 Chapter IV @. The excess of the number of hours per time tickets over the number of hours per time cards is treated as factory overhead. £, The rate per day of an employee with monthly salary of P9,030 must be P360. Exercise 5: Gross Pay with Overtime Premium and Payroll Charges The following information is given based on the contents of clock cards and time tickets for a week. Rate HoursTimedIn = Jobs Worked On Others perHr egular Overtime 25 26 27 28 Nature Ure L P35 48 M 20 40 3 16 12 10 Shipping 4 Oo 25. 50 2 16 7 P 20 45 15 12 11 Repairs 4 Q 28 48 5 10 20 20 R 20 46 21 816 Lis the foreman with the others as his workers. Overtime premium is 25%. The time tickets show that overtime work was done on job no. 25 and the corresponding hours are included already in the tabulation given above. How much must be the gross pay of each worker? Determine what accounts are to be debited for the payroll under each of the following assumptions: a. Overtime work is due to the seasonal changes in the demand for the product. b. Overtime work is due to the rush nature of the job. Exercise 6: Payroll Preparation and Charges ‘You are required to prepare the payroll and the corresponding entries based on the following information. Hours Timed In. Check Hourly dune7 - 13 Monthly W/H No Rate Regular OvertimeKarnings Taxes Lucero, Magno 55 Foreman ‘P50 48 P10,000 ?300 Abe,Mario 22: Worker 30 48 5 7,000 250 Boni, Carlos 23 Worker 30 46. 3 6,500 800 Pantig,Jose 29 Worker 30 48 6 7,200 320 Tonio,Ben 32 Worker 28 45 2 6,800 300 Yasay, Dante 39 Worker 25 48 5 6,000 250 Overtime premium is 30%. Jose Pantig worked for four hours on a holiday because ofthe rush nature of job no. 45. Other overtime work is due to the greater volume of work _ for the month. Payroll deductions include union dues of P50 from each worker aside from income taxes withheld and the contributions for SSS, Medicare, and Pagibig.The time tickets for the week show the following: Abe, Mario Boni, Carlos Pantig, Jose Tonio, Ben Yasay, Dante Required: a. Computation for gross pay b. Weekly job time recapitulation ©, Payroll ‘d. Journal entries Items 1 and 2: ‘The following data are given for 19C: Budgeted produétion volume Allowed number of hours per unit Labor rate per hour No. of regular hours in August per worker Accounting for Labor Cost SAT 1, How many workers are required for the August production? w 1,823 & 73 2. How much must be the budgeted labor cost for August? #. P350,000 ~ Items 3 and 4: Jobs Worked On 39 42 45 (46 Others Hrs. 16 (19 Te Uh Tue TS aA. 3 Oiling 5 13 2 cea0) ce. fOr be 19 «2 16 Inspection 4 MULTIPLE CHOICE 70,000 units V5 hr. P25 192 hours 14,000 & Not given 2 250,000 A, Not given ae, P1825 The following data are given for the period August 12 to 18, 19C: Jobs Worked on ‘ ‘Total PeteTuazon 48 Jose Carlos 46 Mario Farela 50 _ BenGomez 53 : LucioLim 53 : GemTinio 51 48 43 48 46 45 45 DaaAwes 12 15 16 17 10 20 25 30 15 18 23 9 9 5 20 17 Delivery 4 Repairs 5118 Chapter IV Pete Tuazon is the foreman with hourly rate of P30, All the workers under him receive P25 per hour. Overtime work was rendered on working days on job 23, based on a rush order. Accordingly, overtime premium is 25%. 10.00 &% P10.18 F P10.10 3. How much must the total charge to direct labor for the week? # P6,112.50 B P5,300 gi P5,950 d. Not given 4, How much must be the total payroll for the week? x P1765 ys. P7,927.50 p. P7,800 a: Not given 5. Lucena Manufacturing Co. charges factory overhead to production at 80% of direct labor cost. Jobs 842 and 843 were completed and sold in July, 19B. Total direct materials cost and prime cost for Job 842 were P9,000 and P14,000, respectively. Production cost of Job 843 amounted to P31,200 with factory overhead equal to 48% of direct materials cost. How much were the direct labor costs of Jobs 842 and 843? a, P1491 # 5,000 and P7,200, respectively b. P1348 #6. 5,000 and P9,000, respectively ye P4,000 and P7,200, respectively sk None of the above Items 6 and 7: Each of the five (5) workers in a factory is being paid P250 per day. For every unit produced in excess of 25 unitsin one day, a worker ispaid P12, Fixed factory overhead per annum is P198,000 and there are approximately 330 working days in one year. Production data for January 6 and 7, 19C show the following number of units produced by each worker: danuary6 danuary7 Abdon. 26 Belleza 26 Cortes 28 Drillon 27 Emilio 26Accounting for Labor Cost 119 6. What is the average direct labor cost per unit for the two-day period? & P10.00 &% P10.18 £. P10.10 ft. Not given 7. How much savings in fixed factory overhead per unit was effected assuming that additional output is due to the incentive given? KPIS pb P22 fi P24 Al. Not given Aworker earns P10,000 per month on the average and produces 50 units per day. Accordingly, the employer's monthly contributions for SSS, Medicare, Pag-IBIG and EC premiums are P456, P37.50, P10 and P100, respectively. Fringe benefits such as meal and uniform subsidies amount to 9,900 per annum. Assuming that there are 4 330 working days in one yar, what is the effective labor cost per unit? _ a. P1491 b. P13.48 ©, P1375 ' d. Not given ise oy ‘The regular working days in a factory are Monday to Friday. Joe and Pat (who are being paid ‘P25 and P27 per hours, respectively) worked on Jobs 31 and 32 for the period August 4 to 10. The weekly time records and summary of the job tickets show the following: Joe Pat : ‘Total number of hours timed in 45 43 Overtime 6 5 Expended on the jobs: : No. 31 26 iq No. 32 20 21 Joe was authorized to work on overtime on job no. 31 because of its rush nature; Pat had to work on overtime on job no. 32 to make up for a machine breakdown during the week. Overtime premium is 25%.” Factory overhead is 60% of direct labor eost-and materials cost comprises 80% of total production cost. i120 Chapter IV ‘What should be the respective production costs of job nos. 31 and 32? & P7,338 and P6,829 4 P9,172 and P8,536 ¥s. P1,834 and P1,707 a Not given 10. You are given the following statements for evaluation: * Labor cost is both a prime cost and a conversion cost. * The effective cost of labor may be much higher than the basic hourly rate because of additional indirect compensation to workers. * Payroll payments may be delayed only for one day. 4 Allthe statements are true. &. All the statements are false. &, The third statement is false. & Only the first statement is true.