TEST LABOUR COST

1. Overtime premium may be correctly defined as:

a) The bonus paid to skilled workers

b) The increased payment due to overtime hours because of increase rate of pay
c) Payment of all hours in excess of basic working week
d) A premium paid to workers to compensate for fatigue

2. Vacation pay for factory workers should be charged to:

a) Work in progress inventory

b) Direct Labour
c) Factory overhead
d) Administration expenses

3. What is a time sheet used for?

a) To calculate pay only

b) To charge cost centres for work done only
c) To records attendance time
d) To calculate pay and to charge cost centres for work done

4. Direct operatives in a factory are paid on time rate basis for 35 hours’ week. If the
productivity can be improved, what will happen to direct labour costs per unit of the
output?

a) Decrease
b) Increase
c) No change
d) Not possible to determine from the information provided

5. Gross wages incurred in department 1 in June was $54,000. The wage analysis
shows the following summary breakdown of the gross pay:

Paid to direct Labour Paid to Indirect Labour

$ $
Ordinary time 25,185 11,900
Overtime
Basic 5,440 3,500
Premium 1,360 875
Shift Allowance 2,700 1,360
Sick Pay 1,380 300
36,065 17,935

What is the direct wages cost for department 1 in June?

a) $25,185
b) $30,625
c) $34,685
d) $36,065

6. A company employees 20 direct production operatives and 10 indirect staff in its

manufacturing department. The normal operating hours for all employees is 38 hours
per week and all staff are paid $5 per hour. Overtime hours are paid basic rate +
50%. During a particular week all employee worked 44 hours. What amount would be
charge to production overhead?

Subject : MA1
 TEST LABOUR COST

a) $2,650
b) $2,350
c) $450
d) $300

7. A differential piece payment scheme applies to direct workers in a production cost

centre, subject to guaranteed minimum wage of $50 per day. The differential rates for
output each day are:

Up to 100 units $0.50 per unit

Excess over 100 units $0.60 per unit

A worker produced the following over three-day period:

Day 1 100 units

Day 2 90 units
Day 3 110 units

What is the workers total wage for the three days?

a) $151
b) $156
c) $161
d) $166

8. For employees paid on the piece rate basis, which of the following document will
used to calculate their gross pay?

a) Clock card
b) Time sheet
c) Job sheet
d) None of the above

9. Idle time payment paid to direct employee is classified as:

a) Direct labour cost

b) Indirect labour cost
c) Prime cost
d) Period cost

10. A company operates a piecework system to pay its staff. The staff receive $0.20 for
each unit produced. However, the company guarantees that every member of staff
will receive at least $15 per day. Shown below is the number of units produced by
Operator A during a recent week:

Day Mon Tue Wed Thu Fri

Units produced 90 70 75 60 90

What are Operator A’s earning for the week?

a) $75
b) $77
c) $81
d) $152

Subject : MA1
 TEST LABOUR COST

11. Which of the following statements is/are true about group bonus schemes?
(i) Group bonus schemes are appropriate when increased output depends on a
number of people all making extra effort
(ii) With a group bonus scheme, it is easier to award each individual’s performance
(iii) Non-production employees can be rewarded as part of a group incentive scheme

a) (i) only
b) (i) and (ii) only
c) (i) and (iii) only
d) All of them

12. The following data relates to a direct employee in production department A:

Normal working day 7 hours
Hourly rate per day $8
Standard time allowed to produce one unit 6 minutes
Bonus payable at basic hourly rate 50% of time saved
What would be the gross wages payable in a day when employee produces 82 units?
a) $33.60
b) $60.80
c) $65.60
d) $84.00

13. An employee is paid on a piecework basis. The basis of the piecework scheme is as
follows:
1 to 100 units $0.20 per unit
101 to 200 units $0.30 per unit
201 to 300 units $0.40 per unit
Only the additional units qualify for the higher rates. Rejected units do not qualify for
payment. During a particular day the employee produced 210 units of which 17 were
rejected as faulty.
What did the employee earn for their day’s work?
a) $47.90
b) $54.00
c) $57.90
d) $63.00

14. Which of the following statement is correct?

a) Idle time cannot be controlled because it is always due to external factors
b) Idle time is always controllable because it is due to internal factors
c) Idle time is always due to inefficient production staff
d) Idle time is not always the fault of production staff

15. A manufacturing firm has temporary production problems and overtime is being
worked. The amount of overtime premium contained in direct wages normally be
classed as which one of the following:
a) Direct expenses
b) Production overheads
c) Direct labour cost
d) Administrative overheads

Subject : MA1
 TEST LABOUR COST

16. A manufacturing firm is very busy and overtime is being worked. The amount of
overtime premium contained in direct wages would normally be classed as:

a) Part of prime cost

b) Factory overheads
c) Direct labour cost
d) Administrative overheads

17. Employee A is a carpenter and normally works 36 hours per week. The standard rate
of pay is $3.60 per hour. A premium of 50% of the basic hourly rate is paid for All
overtime hours worked. During the last week of October, employee A worked for 42
hours.
The overtime hours worked were for the following reasons:
Machine breakdown 4 hours
To complete a special job at the request of a customer 2 hours
How much of employee A’s earnings for the last week of October would have been
treated as direct wages?

a) $162.00
b) $129.60
c) $140.40
d) $151.20

18. A company pays direct operatives a basic wage of $8.50 per hours plus a
productivity bonus. The bonus is calculated as:
[(time allowed-time taken) × (basic rate per hour÷3)]
The time allowed is 2.4 minutes per unit of output. An operative produced 1,065 units
in a 37.50 hour week. What were the total earnings of the operative in the week?

a) $318.75
b) $333.20
c) $340.40
d) $362.10

19. Labour costs may include:

(i) Overtime hours of direct operatives at basic rate
(ii) Overtime premiums of factory employees
(iii) Productive time of direct operatives
(iv) Training of direct operatives
Which of the above itmes will usually be treated as a direct cost?

a) (i) and (ii)

b) (i) and (iii)
c) (ii) and (iv)
d) (i), (iii) and (iv)

20. Which of the following labour records may be used to allocate costs to the various
cost units in a factory?
(i) Employee record card
(ii) Attendance record card
(iii) Time sheet
(iv) Job card
a) (i) and (ii)
b) (i), (iii) and (iv)
c) (ii) and (iii)
d) (iii) and (iv)
Subject : MA1
 TEST LABOUR COST

21. Which of the following is normally treated as a direct labour cost?

a) Controllable idle time
b) Uncontrollable idle time
c) Overtime premium due to a temporary backlog in production
d) Overtime premium at the specific request of a customer

22. A sales representative earns a basic salary of $10,000 per annum, a guaranteed
end-of-year bonus of $5,000 and 5% commission on the value of sales. What cost
classification is appropriate for the sales representative’s salary?
a) Direct Cost
b) Product cost
c) Semi-fixed cost
d) Prime cost

23. Employee H works a basic 37-hour week and is employed on product manufacture.
He is paid at a rate of $11 per hour for the basic hours with a premium of 30% for any
overtime hours. Employee H worked 5 overtime hours in week 7 to satisfy sales
demand.
What amount out of total gross wages for employee H in week 7, should be charges
as direct labour cost?
a) $407.00
b) $462.00
c) $478.50
d) $423.50

24. A manufacturing company has 20 employees, each paid a basic rate of $5 an hour. A
standard working week is 35hours; overtime is paid at time and a quarter. Last week
all employees worked 37 hours, producing 3,000 units. What is the total unit labour
cost?
a) $1.23/unit
b) $1.25/unit
c) $0.06/unit
d) $1.54/unit

25. Which of the following are the elements of gross pay?

a) Cash paid to employees
b) Cash paid to employees plus income tax plus employer’s benefit contribution
c) Cash paid to employees plus income tax plus employee’s benefit contribution
d) Cash paid to employees plus income tax plus employer’s and employee’s benefit
contribution

26. Which of the following is NOT a purpose of a job card?

a) Providing information on the whereabouts of employees
b) Authorising overtime payments
c) Assisting coding of labour costs
e) Ensuring time is recorded accurately

27. The following data relate to work in the finishing department of a certain factory. The
Normal working day consists of 7 hours and basic rate of pay per hour is $5.
Moreover, the standard time allowed to produce one unit is 4 minutes and premium
bonus is payable at basic rate of 60% of time saved. On a particular day one
employee finishes 180 units. What is his gross pay for the day?

a) $35
b) $50
Subject : MA1
 TEST LABOUR COST

c) $56
d) $60

28. An employee has a normal working week of 40 hours paid at a basic rate of $10 per
hour. Hours in excess of normal are paid at a premium of 30%. In a particular week
the employee worked for 44 hours and tax is payable at 20% of gross wages and
benefit contributions for the employee for the week are $25 from employee and $37
from employer. The employee’s net pay for the week was $336.60. what was the
employee’s gross pay for the week?

a) $478.32
b) $492.00
c) $452.00
d) $498.25

29. A firm currently produces 4,500 units per week at 90% efficiency. The direct labour
cost is $9,000. What will be the direct labour cost per unit if efficiency can be
increased to 100%?

a) $1.80
b) $2.20
c) $1.82
d) $2.22

[Data for Question 30 to 32] A company has three main workers in its production
department. The actual number of units produced by each workers during the month is
as follows:
Employee A 850 units
Employee B 750 units
Employee C 950 units
The standard production per month per worker is 1,000 units and piecework rate is 10
cents per units (actual production). Moreover, additional production bonus is $10 for
each percentage of actual production exceeding 80% actual production over standard
production.

Calculate total monthly remuneration of

30. Employee A __________________

31. Employee B __________________

32. Employee C __________________

33. Production sections of a factory working on a job order system pay their workers
under the bonus scheme. A worker’s basic wage id $4 per day of 8 hours and his
timesheet for a week is summarised below:
Job No Time Allowed Time Taken
01 25 hours 20 hours
02 30 hours 20 hours
The idle time is 08 hours due to machinery breakdown.
Calculate the gross wage he has earned for the week if the bonus is calculated on
the basis of the ratio of time taken to time allowed? __________________

Subject : MA1