subject: Contolling and Accounting For Labor Cost [print this page] Contolling and Accounting For Labor Cost Contolling and Accounting For Labor Cost
Labor Cost may be defined as, salary given to employees or wages paid to workers during an accounting period on daily, weekly, monthly, or job basis, plus payroll and related taxes and benefits (if any). It Represents human contribution to production. There are various factor affecting
Labor Cost which are Assessment of man power requirement, Time and motion study, Control over Idle-time and over-time,Wage system, Control over labor turn over.
Labor cost control is based on pertinent and timely information transmitted to management. Effective labor cost control is achieved through production planning, Use of labor budget, labor time, wage standard, Labor performance reports, Appropriate payment of labor and including wage incentive systems. Productivity is the amount of output produced per labor hour. If productivity increases the cost/unit of output will increase in different ways depending on the remuneration methods.
A worker is paid in proportion to output beyond the standard of performance. Standard of Performance is the performance of an individual or of a group on meeting standard output in exchange of the Base rate or Job rate. Management and labor have employed machines, and materials that will reduce the number of labor hours required to make a product.
PRODUCTIVITY, INFLATION AND PRICE
Productivity has been increasing rapidly in recent years, resulting in more available goods and services, gains in productivity is also important. Inflation erodes the value of savings, reduces purchasing power. If prices are to be kept from rising, than wage increases should not exceed an amount that will cause further increase in unit cost.
PRODUCTION PLANNING DEPARTMENT
Is responsible for(scheduling of work, release of job orders, dispatching of work). Its aimed is achieving the efficient utilization of resources. In any organization through planning, coordination and control of production activities that transform the raw material into finished products. Production planning is concerned with deciding in advance.
The PROCEDURES OF LABOR COSTING are Timekeeping department, Payroll department, Cost department.
Time Keeping Department
It accumulates the total numbers of hour worked by each employee so that his earning can be calculated. If this is not present in the company than it will create a problem for those who are punctual and bound by attendance rules. It Involves Clock card, Time ticket(job ticket). The earning of employee depend upon these forms.
Payroll department
It records hours worked, wages earned, make payroll reduction and determines the net amount of each employee.
Cost Department
On the basis of payroll distribution or the time ticket distribution the cost department records the direct labor cost on production reports and indirect labor cost on department expense report. Cost department is not responsible to record the payroll or distribute it. In some factories the activities are highly centralized and there may not direct and control any timekeeping or payroll preparation.
Computerized pay roll procedure refers to Computerized accounting begins the day an employee is hired and data for employee's name, number, job classification etc are entered in employee master file. It eliminate manual processing.
Reports on labor performance is possible through computerized labor accounting.
