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Manpreet Kaur, Lovely Professional University                         Unit 4: Costing and Control of Labour




                        Unit 4: Costing and Control of Labour                                   Notes


             CONTENTS

             Objectives
             Introduction
             4.1  Labour Turnover
                 4.1.1  Causes of Labour Turnover
                 4.1.2  Effects of Labour Turnover

             4.2  Idle Time
             4.3   Methods of Wages, Payments and Incentive Plans
             4.4  Summary
             4.5  Keywords

             4.6  Review Questions
             4.7  Further Readings

          Objectives

          After studying this unit, you will be able to:
               Compute labour turnover

               Illustrate the methods of wages payment and incentive plans
          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 suffi ciently signifi cant in amount and easily identifi able 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.




             Note   The classifi cation of indirect labour depends upon the manufacturing methods
             and pattern of the organisation and there cannot be any universally acceptable set of

             classification for indirect labour.

          4.1 Labour Turnover

          It denotes the percentage change in the labour force of an organisation. It is a common occurrence
          that the workers do change their jobs. Either they leave their jobs for better prospects or better




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