BBA Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes

BBA Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes : BBA Bachelor of Business Administration December 2019 Most Important Notes Study Material Sample Model Questions Answers Papers in PDF Download.

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BBA Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes
BBA Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes

Bba Study Material Cost Accounting to Direct Labour Remuneration Methods Topic Wise Short Notes: After Studying this Post You Are Able to Understand:- Clock Card, Co-Partnership, Differential Piece Rate, Direct Labour Cost, Fringe Benefits, Group Bonus Plans, Indirect Labour Cost, Job Card, Job Evaluation, Job Ranking, Labour Cost Accounting, Merit Rating, Method Study, Motion Study, Payroll Accounting, Piece Rate Methods, Piece Work Card, Point Rating, Profit Sharing, Time Booking, Time Keeper, Time Keeping, Time Office, Time Rate Methods, Time Sheets, Time Study, Work Study.

Learning objectives

  • Distinction Between Direct And Indirect Costs
  • Job Evaluation And Merit Rating
  • Time Rate Methods Of Remuneration
  • Piece Rate Methods Of Remuneration
  • Group Bonus Plans
  • Requisites Of Good Wage Incentive Plan

Bba Study Material Cost Accounting to Direct Labour Remuneration Methods, Topic Is Direct and Indirect Labour Costs Short Notes

Direct and Indirect Labour Costs

For the purpose of accounting labour cost are classified into

  1. Direct labour, and
  2. Indirect labour

Direct Labour Cost –

The labour cost incurred on the employees who are engaged directly in making the product, their work can be identified clearly in the process of converting the raw materials into finished product is called ‘direct labour cost’. For example, wages paid to the workers engaged in machining department, fabrication, assembling department etc.

Indirect Labour Cost –

The indirect employees are not directly associated with the conversion process but assist in the process by way of supervision, maintenance, transportation of materials, material handling etc.  Their work benefits all the items being produced and cannot be specifically identified with the individual products. Hence, the indirect labour cost should be treated as production overhead. These costs will be accumulated and apportioned to different cost centres on equitable basis and absorbed into product cost by applying the overhead absorption rates.

Items of Labour Cost

The labour cost can be analysed into the following:

  • Monetary benefits payable immediately – Salaries and wages, dearness and other allowances, production incentive or bonus.
  • Monetary benefits after sometimes in the future – Employer’s contribution to P.F., E.S.I., pension etc. gratuity, profit linked bonus.
  • Non – monetary benefits (fringe benefits) – Free or subsidised food, free medical or hospital facilities, free or subsidised education to the employees children, free or subsidised housing etc.

Bba Study Material Cost Accounting to Direct Labour Remuneration Methods, Topic Is Job Evaluation Short Notes

Job evaluation

Job evaluation is a procedure designed to rank jobs on a formal basis and to measure the worth of a job for compensation purposes in relationship to other jobs. It requires written detailed description of work operations encompassed by each job. The descriptions are used to rate jobs according to such facts as skill, responsibility, effort and conditions. The ratings employed to group particular jobs into labour grades with associated pay brackets. It is basically a control procedure established to prevent wages inequities. It is an analysis cost of human effort and its resultant payoff to an organisation. It is a technique of determining the relative worth of jobs i.e., relative position of one job to another job in the organisation. It provides management with a reasonably sound basis for determining the basic internal wage and salary structure for various job positions and ensures that these differentials are consistent and equitable.

Advantages

  • It simplifies wage administration by bringing uniformity in wage rates.
  • A more rational wage and salary structure is set up by making an objective ranking of jobs and simplifies wage administration.
  • It is reasonably effective within an organisation at ranking jobs, particularly low level ones.
  • The new jobs will be brought into the wage structure at the level indicated by the relative worth of existing jobs.
  • The resulting rates for similar skills will be at par with those paid by other organisations in the same region.
  • It helps in drawing clear lines of authority and responsibility for administrative convenience.

Bba Cost Accounting  short Notes of Job Evaluation Methods

Job Evaluation Methods

The methods used in job evaluation are given below:

Job Ranking Method –

Under this method, various jobs are evaluated and ranked according to difficulty in performance and responsibilities. It is a method of an informal arrangement of a hierarchy of jobs from lowest to the highest or on the reverse order. It starts with recording job descriptions and specifications and comparison of different  jobs taking into consideration, the skill, education responsibilities, hazards etc. and ranking is made by comparison of the job with the same components of another job. After ranking each job, they will be put in ranked scale of jobs.

Grande Description Method –

This method is a variant of job ranking method. Under this method, predetermined numbers of grades or classes are established on the basis of education, experience, skill, responsibilities etc. and the jobs are placed in suitable grades or classes. The jobs within the grade should be approximately of similar nature. This method requires an adequate description of each grade to classify all jobs according to their grades or classes.

Factor Comparison Method –

Under this method, a few key jobs are selected and are used in creating a rating scale by evaluation and ranking all the key jobs according to each of the factors. Job comparisons are based on analysis of five factors.

  • Mental requirements
  • Skill
  • Physical requirements
  • Responsibility and ,
  • Working conditions.

These factors should be compares with the jobs to be evaluated to see if they are appropriate, the wage rate is divided into the amounts being worth payable for each of the factors and a factor scale is constructed. By comparing job specifications written in the factor comparison manner with those for the key jobs, remaining jobs may be classified with relative case to arrive at the wage rate payable to those jobs.

Point Rating Method

Under this method, jobs are broken into component factors like education experience, skill, responsibility, mental requirements, physical requirements etc. Each of these factors is given a relative weightage and points are allotted. The jobs are ranked in the order of points scored and are placed in the number of predetermined grades. A job’s place in the scale indicates a number which when added to numerical values from the other factors scales, gives a total point value for that job. Comparative point values indicate the relative worth of the various jobs being considered, basing on which pay scales are fixed for each of these grades. The evaluation of factor points is based on the exercise of human judgment.

Bba Cost Accounting  short Notes of Merit Rating

Merit Rating

Merit rating is concerned with the evaluation of individual employee. It is a technique used to rate an employee’s performance to assist in determining whether a person should receive a merit award promotion, demotion etc. in merit rating an individual worker’s certain  characteristics like attendance, co-operation, discipline, acceptance of responsibility, integrity, honesty, intelligence, skill etc. are assessed to measure the worth of individual worker. It is an evaluation of individual performance on the job in terms of job requirements. It is an assessment of individual performance on systematic basis and the scope for bias is eliminated while evaluation. Merit rating provides a scientific basis for determining fair wages for each worker based on his ability and performance.

Bba Study Material Cost Accounting to Direct Labour Remuneration Methods, Topic Is Studies at Work Place Short Notes

Studies at Work Place

Time and Motion Study

Time study is a technique designed to establish the time for a qualified worker to carry out specified elements under specified conditions at a defined rate of working recorded by direct observation of the times using a time measuring device and the ratings for individual elements. Time and motion study is a technique for recording the times and rates of working for the elements of a specified job carried out under specified conditions, and for analyzing the data so as to obtain the time necessary for carrying out the job at a defined level of performance. The main objective of the study is the development of standard time which is normally defined as the time required by an ‘average worker’. Working at ‘normal pace’  to complete a specified task using a ‘specific method’. The possession of exact knowledge through time study helps to eliminate waste, minimise costs..

Method Study

Method study is concerned with how things are dome and is aimed quite simply at finding better ways of doing things. There are five ways that methods can be improved:

  • Eliminate unnecessary tasks
  • Simplify the process
  • Combine tasks
  • Rearrange tasks, and
  • Reduce the number of operations.

Method study is usually undertaken in the following stages:

  • The area of study is defined. This will be determined by cost/benefit considerations.
  • Information is gathered by observing and interviewing employees. Flow charts and management reports are analysed.
  • Alternative methods of performing work are considered. This process involves analyzing current methods used and the following questions are asked:
  • Is the job and all aspects of it necessary?
  • Is the best equipment used?
  • Are controls adequate?
  • Do bottlenecks and idle time occur?
  • Is the standards set for the job acceptable?
  • The best alternative is developed and installed.
  • Feedback is obtained and progress is monitored.

Method study is the critical study of existing and proposed ways of doing work as a means of developing and applying easier and more effective methods and reducing costs.

Work Study

Work study, in its broadest sense, is the application of systematic analysis to the work of men and machines so as to improve method and to establish proper time values for that work. The objectives of work study are:

  • The most effective use of plant.
  • The most effective use of human effort.
  • A reasonable work load for those employed.

Work study investigates every aspect of existing or proposed work in order to find the best way of performing tasks. It involves setting standards and solving problem which include bottlenecks, low morale large amounts of defective work and low productivity. Work study is comprised of methods study and work measurement. Work study is a general term for those techniques (especially method study and work measurement) that are used in the examination of human work, and which lead systematically to the investigation of all factors affecting the efficiency of the situation being reviewed as a basis for making improvements.


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