COST ACCOUNTING AND CONTROL
ACCOUNTING FOR LABOUT
LABOR • Modified Wage Plan
• The physical or mental effort exerted by individuals This plan combines the features of hourly-rate and
in the creation of a product. • Labor cost is the price piece-rate plans. Minimum hourly wage will be paid
paid for using human resources • The compensation by the company even if an established quota of
paid to employees who engage in production related production is not attained by an employee. If the
activities represent factory labor. established quota is exceeded, an additional payment
• A second major element of cost. per piece would be added to the minimum wage
level.
Direct Labor – represents payroll costs that are
allocated directly to the product. PROPER COSTING OF LABOR
Indirect Labor – labor costs incurred for a variety of
jobs that are related to the production process but are
considered either too remote or too insignificant to be
charged directly to production.
Wages – payments made on an hourly, daily, or
piecework basis.
Salaries – fixed payments made regularly for
managerial or clerical services.
The accounting system of a manufacturer must Time Card
include the following procedures for recording
payroll costs.
1. Recording the numbers of hours used in total and
by job.
2. Recording the quantity produced by the workers.
Time Ticket
3. Analyzing the hours used by employees to
determine how time is to be charged.
4. Allocation of payroll costs to jobs and factory
overhead accounts.
5. Preparation of the payroll, including computation
and recording of the employees gross earnings,
deductions, and net earnings.
Production Report
WAGE PLAN – the plan established by management
• Payroll
A calculation of all employee’s compensation,
• Hourly-Rate Plan
statutory contributions, taxes, deductions, and
Under this plan, a definite rate per hour is set for each
net payment for a certain time period. The formal
employee. The employees' wages are calculated by
document to present payroll is called payroll register.
multiplying the rate per hour by the number of hours
worked.
• Payslip
A document that explains the components of an
• Piece-Rate Plan
individual’s pay for a certain time period. It is
Under this plan, earnings are calculated by
a personal version of payroll register.
multiplying the employee’s output by the rate per
piece.
COST ACCOUNTING AND CONTROL
ACCOUNTING FOR LABOUT
COMPUTATION OF NET PAY
Special Considerations In Factory Labor:
• When the jobs are rush, overtime pay is normally
encountered to cover the extra hours the worker has
rendered. Normally, overtime premium is charged to
factory overhead. However, if because of a rush job,
it is inevitable to work overtime, the whole overtime
pay is charged to production.
• Workers are also paid during idle time. Idle time
refers to the time workers has no work to perform due
to temporary changes in production setup. This is
charged to FOH. However, a loss account is to be
established when the changes in production is due to
negligence or inefficiency.
1. Normal Idle Time – waste of time which we can
not stop because it is normal and employer has to pay
laborers for this idle time.
Examples: Walking time from one department to
other department, consuming time to set the
machines, etc.
2. Abnormal Idle Time – wastage of time which we
can stop by good supervision,
Examples: Waste of time due to inefficiency of
engineers, delay of supply of material to factory,
strike and lockout, etc.
COST ACCOUNTING AND CONTROL
ACCOUNTING FOR LABOUT
According to Labor Code of the Philippines: Regular Holidays and Nationwide Special Days
• Normal Hours of Work (ART.94 Sec.26 of Labor Code of the Philippines)
The normal hours of work of any employee shall not
exceed 8 hours a day. • Regular Holidays
New Years Day – January 1
• Meal Periods Maundy Thursday – Movable date
Not less than 60 minutes for regular meals of Good Friday – Movable date
employees which is non-compensable. Eidul Fitr – Movable date
Rest periods or coffee breaks running from 5 to 20 Eidul Adha – Movable date
minutes shall be considered compensable working Araw ng Kagitingan Monday nearest April 9
time. Labor Day – Monday nearest May 1
Independence Day – Monday nearest June 12
• Right to Weekly Rest Day National Heroes Day – Last Monday of Aug.
Not less than 24 hours after every 6 normal work Bonifacio Day – Monday nearest Nov.30
days. Christmas Day – December 25
Rizal Day – Monday nearest Dec.30
• Night-Shift Differential
Refers to the additional compensation for work • Nationwide Special Holidays
performed from 10 O’clock in the Ninoy Aquino Day – Monday nearest Aug.21
evening to 6 O’clock in the morning. Plus 10% of the All Saints Day – November 1
hourly rate for work. Last Day of the year – December 31
• Overtime Pay
Refers to the additional pay for work performed in
excess of 8 hours a day. Plus 25% of the hourly rate
for work performed in excess of 8 hours on ordinary
day. Work performed beyond 8 hours on a holiday or
rest day shall be paid an additional compensation
equivalent to the rate of the first eight hours on a
holiday or rest day plus at least 30% thereof.
• Holiday Pay (Regular Holiday)
For work performed on a regular holiday, plus 100%
or a total of 200% of the employee’s daily wage rate.
• Compensation for Rest Day, Sunday or Holiday
Work
Plus 30% of the daily basic rate or a total of 130% for
work performed on rest day or special day. Plus 50%
of the daily basic rate or a total of 150% for work
performed on special day falling on the employee’s
rest day. Plus 30% of the daily basic rate or a total of
260% for work performed on a regular holiday falling
on the employee’s rest day.
