By Mark Lee Inman
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Extra resources for Cost Accounting. Stage 2
1234 No. 8901 No. 00 From this, the six hours worked on jobs would be charged to the jobs, and there would be two hours written off to overhead, as maintenance and idle time. To take the analysis further, if Alun had produced seven hours, then seven hours would be charged to the jobs. The accounting of this would be as follows: Labour cost control account Debit cost of labour [Wages control] Balance [if any] to costing profit and loss account Credit work-in-progress [Charges to individual jobs] Maintenance overhead Idle ^ m e If there is a situation where it is not possible to assign labour costs to individual contracts, as in some forms of process industries or mass production, then it is better to charge a value added rate, based on either labour hours or some more realistic method.
1 Operational losses arise when too much stock has to be issued to manufacture the product. Irrespective of whether standard costing is being used or not, the quantities of material required to be used in a production operation are known and actual use can be accordingly measured. If it is different, then it could be because: (a) Quality of material is not up to specification causing more to be required. (b) Quality of labour is causing more rejects, or more wastage in the production process. (c) Poor storage will also cause deterioration of stores, or damage to containers causing deterioration.
The following rules should be considered in the general arrangement and location of stores: 1 Heavy goods should be kept near the floor. 2 Goods most regularly required should be easily accessible. 3 Goods susceptible to dampness or any other risk of deterioration should be properly protected. Equally, goods should not be allowed to contaminate each other. 4 Valuable or fragile goods should receive special protection. 5 Stores should be located convenient to receiving bay and the location of use.
Cost Accounting. Stage 2 by Mark Lee Inman