COSTING AND CONTROL OF LABOR

NAMA : RIO RIZA MAULANA

NIM : 125020200111031

LABOR COST

oLabor cost is the price paid for using human

resources.
oThe compensation to employees who work in
production represents labor cost.

DIRECT LABOUR COST

oAny labour cost that is specially incurred for or can be
readily charged to or identified with a specific job,
contract, work order or any other unit of cost is
termed as direct labour cost. Wages for supervision,
wages for foremen, wages for labours who are
actually engaged in operation or process are the
examples of direct labour cost.
oDirect labour costs:all hours worked x normal hourly
rate
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INDIRECT LABOUR COST

oIndirect labour is for work in general. The importance
of the distinction lies in the fact that whereas direct
labour can be identified with and charged to the job,
indirect labour cannot be so charged and has,
therefore to be treated as part of the factory
overheads to be included in the cost of production. For
example, salaries and wages of supervisors,
storekeepers and maintence labour etc.
oIndirect labour costs:overtime premium, idle time, sick
pay, holiday pay.
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COST INCLUDED IN LABOR

o Gross pay equals regular earnigs plus overtime premium, and
applies to direct and indirect labor.
o Regular earnigs represents the total hours worked, including
overtime, multiplied by the premium rate.
o The premium rate tor overtime is usually one-half the regular
rate.
o Wages are payments made on an hourly, daily, or piecework
basis.
o Salaries are fixed payments made regularly for managerial or
crerical services.
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OVERTIME AND SHIFT PREMIUM

oOvertime premium presents the one-half

portion of time and a half.
oOvertime premium is preferably separated
from straight-time earnings.
oOvertime premium is charged to overhead,
and spread over all production.
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VACATION AND HOLIDAY PAY

oFactory employees are generally entitled to

paid vacations after an initial period of
employment.
oVacation pay should not be charged to workin-process.

PENSIONS
Under most pensions plans, the employer and
often the employee make contributions toward
employee retirement benefits.
The total cost of a pension plan are based on
the following factors:
1. Length of time that benefits will be paid
2. Number of employees retiring each year
3. Amounts of benefits paid to each retire employee
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BONUS
oA bonus is a payment given in addition to an
employees usual compensation.
oA bonus may be given for a variety of reasons, but
generally it is a reward for greater productivity or
effort.
oThe amount of the bonus may be a set figure, a
percentage of the profits, or a percentage of ones
salary.
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FRINGE COSTS
oPaid vacations and pensions are only two of the
fringe benefits frequenly given to employees.
oTotal payroll costs are now generallt far above the
cost of wages.
oBelow are listed additional fringe costs may be borne
by the employer:
o Sosial security
o Insurance
o tax
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INCENTIVE PLANS

oA wage-incentive plan is a system employed

by some companies as a means of
minimizing and controlling labor cost.
oit involves the payments of additional
compensation for greater productivity.

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ACCOUNTING FOR LABOR

oAccounting for labor by a manufacturing

organization usually involves three activities:
i.time-keeping,
ii.computation of total playroll (wages),
iii.And, allocation of payroll costs

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TIMEKEEPING

oThe timekeeping function involves two major

activitites in labor costing and control:
o It accumulates the total number of hours
worked bu each worker so as to calculate his
earnings
o It determines how the labor hours were spent
so that proper distribution can be made in the
cost records.
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