Cost Accounting - Labour

Cost Accounting - Labour
1. A company produces 500 units of a product. The labour rate per hour is
$12/hour. 50 hours were worked on this product of which 10 hours were
overtime at time and a half. There were a further 26 hours of idle time due to
an industrial dispute in another path of the factory. Four of the overtime hours
were at the specific request of a customer.
What is the total cost of direct labour?
A. $600.
B. $624.
C. $660.
D. $912.
The following information is given regarding the performance of labour:
Hours
Standard hours of work achieved 2,400
Actual hours worked 2,300
Total budgeted capacity 2,600
The following two questions relate to this information:
2. Calculate the labour efficiency ratio.
A. 92%.
B. 96%.
C. 104%.
D. 108%.
3. Calculate this labour capacity ratio.
A. 88%.
B. 92%.
C. 104%.
D. 113%.
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4. A company has the following information regarding its overall complement of
employees. It started the year with 64 employees and ended the year with 81
employees. During the year 8 people left the employ of the company and were
replaced.
What is the labour turnover?
A. 10%.
B. 11%.
C. 23%.
D. 34%.
5. A department produced 1,300 units in the last week. Employees are paid a
basic salary of $14/hour for a 35 hour week. Currently there are 5 employees in
the department.
The standard time to produce a unit is 7 units per hour. If the employees work
faster than this they benefit by 50% of the time saved at the standard rate per
hour.
What is the average employee salary in the department?
A. $490.
B. $505.
C. $2,450.
D. $2,525.

6. An employee earns his wages by means of a piece rate system. He earns $13
for every 100 units produced. During the week he worked 36hours and
produced 3,300 units. There is a guaranteed minimum rate per hour that can
be earned of $11 per hour. A further guaranteed minimum comes from
minimum wage legislation that dictates that the employee must be paid a
minimum of $20.800 per annum.
What should be earned by the employee during the week?
A. $330.
B. $396.
C. $400.
D. $429.
7. The following statements relate to labour costs:

There would be an increase in the total cost for labour as a result of:
i. Additional labour being employed on a temporary basis.

ii. A department with spare capacity being made to work more hours.
iii. A department which is at full capacity switching from the production of one
product to another.
What of the above is/are correct?
A. (i) only.
B. (ii) only.
C. (iii) only.
D. (i) and (iii) only.

8. A company pays production line staff on an hourly basis. The basic rate is $8/hr
for a 40 hour week. Overtime is paid at one and a half times the basic rate.
For a particular week, an employee works 52 hours. There was 4 hours of idle
time due to a machine breakdown.
What portion of the employee’s weekly wage would be direct labour cost
_______________
9. A production worker in a car manufacturing company has a standard working

week of 40 hours. In a given week, they work 56 hours. 7 hours of overtime
were worked at the request of a customer.
Idle time in the factory was 10 hours for the week due to a late delivery of a
materials from the company’s supplier.
The basic rate for production workers is $8/hours. Overtime is paid at one and
a half times the basic rate.
What are the direct and indirect labour costs for the company?
Direct Indirect
A. $368 $144
B. $348 $116
C. $448 $136
D. $396 $116

10. A production line employee gets paid on a piece ratio basic. For each unit
produced, they are paid $10.
The standard time to produce one unit is 2 hours.

In addition to the piece rate salary, a bonus is paid of $4 per hour saved in
production.
In a given week, an employee produces 24 units in 40 hours.
What salary will they receive?
A. $272
B. $256
C. $248
D. $240
11. A company has the following information in relation to staff turnover for the
year:
No. of employees at the start of the year 110

No. of employees at the end of the year 90
No. of employees leaving during the year 25
What was the labour turnover rate of the year?
A. 25%
B. 23%
C. 5%
D. 3%

The following information relates to the next 2 questions.
A company has the following information for a given week:
Budgeted Production 2,000 units

Actual Production 2,200 units
Each unit is expected to take 3 labour hours.
Actual labour hours worked for the week were 6,800.
12. What is the labour efficiency ratio?
A. 88%
B. 97%
C. 103%
D. 113%
13. What is the labour capacity ratio?
A. 88%
B. 97%
C. 103%
D. 113%
14. Which of the following would not cause the labour efficiency ratio to be less
than 100%?
A. Lower skilled labour force.

B. Unexpected idle time.
C. Reduced motivation.
D. Reduced sales/production levels.

15. A factory worker is paid on a piece rate basis. They are paid $1.50/unit for the
first 100 units produced. The rate increases to $2.00/unit for all units produced
in excess of 100.
There is a statuary guaranteed minimum wage of $250.
What will the worker’s wage be if they produce 170 units?
A. $250
B. $255
C. $290
D. $340
16. An employee earns wages using a piecework system. They will earn $2 per unit
for the first 100 units produced. The rate per unit increases to $2.5 for all units
produced above this. There is a guaranteed minimum wage of $200 per week.
What is the employee’s wage for a week in which they produce 120 units
(rounded to the nearest dollar)?
$________________
17. An employee has a basic rate of $8 per hour for a 40 hour week. For a given
week, they work 56 hours. 5 of these hours were idle time due to a machine
breakdown. 3 hours of overtime were worked at the specific request of a
customer.
The overtime premium is $4 per hour.

How much of the employee’s total wage for the week would be classified as
indirect cost for the company (rounded to the nearest dollar)?
$_________________

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Cost Accounting - Labour

What is the total cost of direct labour?

The following information is given regarding the performance of labour:

The following two questions relate to this information:

2. Calculate the labour efficiency ratio.

3. Calculate this labour capacity ratio.

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What is the labour turnover?

What is the average employee salary in the department?

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What should be earned by the employee during the week?

7. The following statements relate to labour costs:

i. Additional labour being employed on a temporary basis.

What of the above is/are correct?

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9. A production worker in a car manufacturing company has a standard working

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The standard time to produce one unit is 2 hours.

No. of employees at the start of the year 110

What was the labour turnover rate of the year?

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A company has the following information for a given week:

Budgeted Production 2,000 units

Each unit is expected to take 3 labour hours.

Actual labour hours worked for the week were 6,800.

12. What is the labour efficiency ratio?

13. What is the labour capacity ratio?

A. Lower skilled labour force.

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The overtime premium is $4 per hour.

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