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Cost Accounting – I

Notes disadvantages of Merit Rating

Following are the disadvantages of merit rating:
(i) Judgment of raters may be influenced by past rating records,

(ii) Incentive method introduced on the basis of merit rating may not be always strong enough
to attract better performance from workers, and
(iii) Since human opinion is involved in rating, it may be arbitrary and consequently lead to
labour unrest.

6.6 Idle Time

Usually, there is bound to be some difference between the time booked to different jobs or work
orders and gate time. The difference of this is known as idle time. Idle time is that time for which
the employer pays, but from which he obtains no production. Idle time is of two types:
(a) Normal idle time, and
(b) Abnormal idle time

Normal Idle Time

This represents the time wastage that cannot be avoided and, therefore, the employer must bear
the labour cost of this time. Following are some examples of normal idle time:
1. The time taken in going from the factory gate to the department in which the worker is to
work, and then again the time coming from the department to the factory gate at the end of
the day.
2. The time taken in packing up the work for the day.
3. The time which elapses between the completion of the job and the commencement of the
next job.
4. The time taken for personal needs and tea breaks.
5. The time lost when production is interrupted for machine maintenance.

As it is unavoidable cost and as such should be included in cost of production.

Abnormal Idle Time

It is that time wastage which can be avoided if proper precautions are taken. Examples of
abnormal idle time can be cited as below:
1. The time wasted due to breakdown of machinery on account of the inefficiency of the work
engineers.
2. Time wasted on account of the failure of the power supply.
3. The time wasted due to strike or lockouts in the factory.

Idle Time Measurement

Machine breaks down; materials shortages, power failure, and the like result in idle time. The
costs incurred during idle time are ordinarily treated as manufacturing overhead cost rather
than as a direct labor cost. Most managers feel that such costs should be spread over all the

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