Page 65 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes 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.
!

Caution It is a principle of costing that all abnormal expenses and losses should not be
included in costs and as such wages paid for abnormal idle time should not form part of
the cost of production. The wages paid for abnormal idle time should be debited to costing
Profit & Loss Account.

Self Assessment

Fill in the blanks:
1. ...................... denotes the percentage change in the labour force of an organisation.
2. Cost of labour turnover is treated as an ...................... and should not be charged direct to
any work order.
3. ...................... is that time for which the employer pays, but from which he obtains no
production.
4. ...................... represents the time wastage that cannot be avoided and, therefore, the
employer must bear the labour cost of this time.

5. The ...................... includes the time wasted on account of the failure of the power supply.
6. The wages paid for abnormal idle time should be debited to costing ...................... .
7. Labour turnover according to ...................... .
= Number of employees left during a period/Average number of employees during a
period × 100

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