Chapter:- 13 Accounting for Labour

Chapter:- 13

Accounting for Labour

1. What is Labour cost?

Ans:-Labour cost is the total expenses paid to workers for their physical and mental contribution in the manufacturing activities.

2. What do you mean by direct wages or labour ?

Ans:-Direct wages cost is the remuneration of the employees who are directly involved in the manufacturing operation or the conversion of raw materials into finished products. Direct wages, productive wages, Factory wages paid to workman are the examples of direct wages.

3. What do you mean by indirect wages or labour?

Ans:-Indirect wages is the remuneration of the employees who are not directly involved in the manufacturing process or conversion of raw materials into finished product. Wages paid to supervisors, wages paid to watchman, wages paid to foreman etc. are the examples of indirect wages.

4. Define piece rate system of wages payment. How is it determined?

Ans:-The system of making payment of wages according to the units of output produced by the workers is called piece rate system. 

In this system, the total wages is determined by using the following formula:

Total wages = Total output × Piece rate

5. State any three advantages of wages payment under piece rate system.

Ans:-The three advantage of piece rate system are as follows:

a. Simplicity:-The piece rate system is also simple to operate and easy to understand. It does not involve tedious calculations.

b. Incentive to workers:-This system provides an incentive to the workers to work hard as the wages are paid on the basis of quantity of output.

c. No payment for idle time:-Under piece rate system, no payment is made to the workers for the idle time as a result of which the cost of supervision is not considerable.

6. Write any three disadvantages of piece wages system?

Ans:-The three disadvantages of piece wages system are as follows:

a. Less attention to quality:-As the payment of wages is made on the basis of output, the workers might work in hurry, which may affect the quality of the output adversely.

b. Inefficient use of machines and materials:-An excessive wastage of, materials and frequent breakdown of machinery may be caused by the workers due to their efforts to obtain maximum output.

c. No guarantee of minimum wages:-There is no guarantee of minimum daily wages to workers.

7. Define time rate system of wages payment. How is it determined? 

Ans:-The system of making payment of wages according to the time spent by the workers on production is called time rate system. Under this this system, wages is paid according to the time i.e. hour, day, week, month etc.

In this system, the total wages is determined by using the following formula:

The wage = Total time taken × Time rate

8. Mention any three advantages of time rate system of wages payment.

Ans:-The advantages of time rate system are as follows:-

a. Simplicity:-It is very easy to understand and simple to calculate the earning of workers under this method.

b. Guarantee minimum wages:-It guarantees a minimum wages to workers.

c. Quality production:-This method ensures production of better quality due to the careful attention of the works.

9. Mention any three disadvantages of time rate system of wage payment.

Ans:-The three disadvantages of time rate system are as follows:

a. No incentive to the efficient workers:-This system lacks incentive to efficient workers since all workers are paid equally and no distinction is made between efficient and inefficient workers.

b. Go-slow policy:-The workers, in order to earn higher wages for overtime work, may try to perform the work slowly which leads to increase in labour cost per unit.

c. Payment for idle time:-Under this method, idle time of the workers is also paid that increase the cost of production.

10. Mention any three differences of time wages system and piece wages system.

Ans:-The differences between piece rate wages and time wages system are as follows:

Basis of difference Piece wages system Time wages system
  1. Calculation of wages
Wages is calculated on the basis of production units. Wages is calculated on the basis of time spent on work.
  1. Quality of work
It does not consider the quality  of work. The quality of work will be better.
  1. Idle time
There is a less chance of idle time in this system. There is a possibility of excessive idle time in this system.

11. Write the meaning of time and motion study.

Ans:-Time and motion study is one of the techniques for controlling labour cost in production job. It is the function of engineering department. 

Time study is an art of observing and recording the time needed for each job of industrial operation. The main purpose of time study is to determine the proper time required to complete the job. 

Motion study is the study of worker or a machine in performing a production job. It helps to eliminate useless, undirected and inefficient motions in order to increase the productivity.

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