Cost Ascertainment - Labour Cost

1. Classification of Labour Cost

  • Direct Labour: Wages paid to workers directly engaged in transforming raw materials into products (e.g., assembly line workers).
  • Indirect Labour: Wages paid to auxiliary support staff (e.g., security, maintenance, and cleaning crews).

2. Methods of Remuneration

  1. Time Rate System: Workers are paid based on hours worked, regardless of output.
    • Wages=Hours Worked×Hourly Rate\text{Wages} = \text{Hours Worked} \times \text{Hourly Rate}
  2. Piece Rate System: Workers are paid based on units produced, regardless of time spent.
    • Wages=Units Produced×Rate Per Unit\text{Wages} = \text{Units Produced} \times \text{Rate Per Unit}

3. Incentive Wage Plans

  • Halsey Premium Plan: Worker receives guaranteed time rate wages, plus a premium of 50% of the time saved.
    • Total Earnings=(T×R)+[0.50×(S−T)×R]\text{Total Earnings} = (T \times R) + [0.50 \times (S - T) \times R] (Where TT = Time taken, SS = Standard time allowed, RR = Hourly rate)