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Cost Accounting – I Sukhpreet Kaur, Lovely Professional University

Notes Unit 6: Labour Cost

CONTENTS

Objectives
Introduction
6.1 Labour Turnover
6.2 Labour Cost Management
6.3 Job Analysis
6.4 Job Evaluation

6.5 Merit Rating
6.6 Idle Time
6.7 Summary
6.8 Keywords

6.9 Review Questions
6.10 Further Readings

Objectives

After studying this unit, you will be able to:

z z Define the labour turnover;
z z Understand the labour cost management;
z z Describe the job analysis;
z z Define the job evaluation;

z z Examine the merit rating;
z z Learn about the time keeping;
z z Identify the idle time.
Introduction

Labour is the most sensitive element in any manufacturing activity. The performance of labour
has a direct bearing on all other elements of cost too.

Labour may be classified as direct when (a) there is a direct relationship of the labour to a particular
production unit or process, (b) the labour cost is measurable in terms of such production unit or
process, and (c) the labour cost is sufficiently significant in amount and easily identifiable with
particular production unit or process. Indirect labour costs are those costs which are necessary for
production purposes but are not identifiable with a particular production unit. Such costs consist
of (a) labour costs in service departments, such as, purchasing, engineering, time-keeping, etc.
(b) labour cost of certain works of production departments, viz, salaries of foremen, helpers,
clerical assistants, and (c) labour costs connected with general factory services, viz, salaries of
works manager, chief inspector, factory office staff, etc.

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