Page 117 - DCOM202_COST_ACCOUNTING_I

Unit 6: Labour Cost

Notes
Example: The personnel department of a organisation gives you the following information
regarding labour. Calculate labour turnover rate using the various methods of labour turnover.
Number of workers on the payroll:

At the beginning of the month 2,900
At the end of the month 1,100
During the month 20 persons quit while 80 persons are discharged. 300 workers are required
during the month. Of these, 50 workers are recruited in the vacancies of those leaving while the
rest were engaged in accordance with an expansion scheme.
Solution:
Average number of workers during the month:

2900+1100
= 2000
2
Labour Turnover Rate by:
Number of separations during a period
(i) Separation Method = × 100
Average number of workers during the period
+
20 80
LTR = × 100
2000
LTR = 5%
Number of workers replaced in a period
(ii) Replacement Method = × 100
Average number of workers during the period
50
LTR = × 100
2000
Number of separations + Number of replacements
(iii) Flux Method = × 100
Average number of workers during the period
100 50
+
LTR = × 100
2000
LTR = 7.5%
Example: From the following data given by the personnel department, calculate the
labour turnover rate by applying:

(a) Separation Method,
(b) Replacement Method, and
(c) Flux Method.
Number of workers on the payroll:
At the beginning of the month 900

At the end of the month 1,100
During the month 10 workers left, 40 persons were discharged and 150 workers were recruited.
Of these, 25 workers were recruited in the vacancies of those leaving, while the rest were engaged
for an expansion scheme.
Solution:
No. of workers in beginning + No. of workers at the end
Average Number of Workers =
2

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