Mirchawala’s Hub Of Accountancy:

Accounting For Labour:

1. Which accounts need to be charged for factory wages used in production?
A. Wages control, work in progress and production overhead
B. Work in progress and finished goods
C. Creditors and wages control
D. Wages control, production overhead and bank

2. A direct operative in a production cost centre worked for 41 hours in week 6. The basic week is 38 hours
and the basic rate of pay is $12 per hour. Extra hours are worked to meet the general needs of the
business and are paid at a premium of 20% above the basic rate.
How much of the direct operative's gross wages in week 6 would be charged as a direct cost?
A. $456.00
B. $492.00
C. $499.20
D. $535.20

3. A bonus scheme operates in a factory. The bonus is calculated as:

[(time allowed - time taken) / 3] x basic rate per hour
Basic pay in the factory is $10 per hour and time allowed is one hour for the production of 20 units. An
employee produced 820 units in 35 hours.
What were the employee's total earnings?
A. $350
B. $370
C. $400
D. $410

4. A piecework scheme of labour remuneration applies to all direct workers in a factory. The scheme
for each individual is as follows:
$
Up to 500 units 0.50per unit
501 to 1,000 units 0.75per unit
1,001 to 1,500 units 1.00 per unit
Only the additional units produced qualify for the higher rates. Units that fail inspection do not
qualify for any payment.
Direct worker X produced 1,200 unit, but 32 units failed inspection.
What wages were paid to direct worker X ?
A. $825
B. $1,168
C. $793
D. $1,200

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5. A piecework scheme of labour remuneration applies to all direct workers in a factory. The scheme for
each individual is as follows:
$
Up to 250 units produced in a week 14per unit
Between 251 and 300 units produced in a week 17per unit
Over 300 units produced in a week 20per unit
Only the additional units produced qualify for the higher rates. Units that fail inspection do not qualify
for any payment.
Direct worker X produced 320 units in week 4 but 30 units failed inspection.
What wages were paid to direct worker X in week 4?
A. $4,180
B. $6,400
C. $4,750
D. $4,930

6. The packaging section in a warehouse operates a piecework payment system as follows:

Units packed Piecework rate
per unit ($)
1 to 5,000 0.04
5,001 to 8,000 0.05
8,001 and above 0.06
Only additional units packed, over the previous threshold, are paid at the higher rates.
If 8,340 units are packed, what are the wages?
A. $367.00
B. $370.40
C. $420.40
D. $500.40

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7. For indirect workers, how are overtime premiums and idle time costs normally accounted for?
A. Overtime premiums: Indirect cost Idle time: Direct cost
B. Overtime premiums: Indirect cost Idle time: Indirect cost
C. Overtime premiums: Direct cost Idle time: Direct cost
D. Overtime premiums: Direct cost Idle time: Indirect cost

8. For direct workers, how are overtime premiums and idle time costs normally accounted for?
A. Overtime premiums: Indirect cost Idle time: Direct cost
B. Overtime premiums: Indirect cost Idle time: Indirect cost
C. Overtime premiums: Direct cost Idle time: Direct cost
D. Overtime premiums: Direct cost Idle time: Indirect cost

9. Differential piecework remuneration operates in an assembly department. Details of the payment

scheme are as follows:
Units assembled per week Piecework rate per unit
($) up to 100 3.50
between 101 and 150 4.00
over 150 4.50
Only extra units assembled, over the previous threshold, qualify for the higher rate.
How much would be paid to a worker who assembled 160 units in a particular week?
A. $720
B. $570
C. $595
D. $645

10. Employee X is paid $3.60 for each unit produced up to and including 100 units per week and then
$4.00 per unit for any additional production in each week. Employee X has a guaranteed minimum
wage of
$300 per week. Employee X's production over a three-week period was as follows:
Units
Week 1 95
Week 2 104
Week3 80
What was employee X's total wage for the three-week period?
A. $1,006.00
B. $1,016.40
C. $1,018.00
D. $1,046.00

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11. Which of the following is an example of indirect labour?
A. Doctor
B. Teacher
C. Bus driver in a transport company
D. Supervisor

12. 20 direct workers and five indirect workers, who all work a basic week of 38 hours, are employed in
a factory cost centre. Overtime, paid at 40% above the basic rates, is worked as necessary to meet
the general output requirements of the factory.
Basic rates of pay are as follows:
$ per hour
Direct workers 12.00
Indirect workers 9.50
During Week 6, the direct workers were paid for 810 hours and the indirect workers for 210 hours.
What amount is charged as indirect labour cost in week six?
A. $1,995
B. $2,071
C. $2,235
D. $2,311

13. The production wages in a company for a period include overtime premium paid to direct
operatives. The company’s policy is to treat overtime premium as a direct cost.
What are the correct bookkeeping entries to account for the overtime premium?
A. Dr production overheads Cr wages
B. Dr work in progress Cr wages
C. Dr production overheads Cr work in progress
D. Dr work in progress Cr production overheads

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

A. Overtime premium due to a temporary backlog in production
B. Overtime premium at the specific request of a customer
C. Uncontrollable idle time
D. Controllable idle time

15. 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 the total gross wages for Employee H in Week 7, should be charged as direct
labour cost?
A. $407.00
B. $462.00
C. $478.50
D. $423.50

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16. A factory employs 25 direct production workers and 10 indirect staff. The standard working week is 40
hours. All staff are paid at the basic rate of $8 per hour with overtime paid at time and a half. Last week
all employees worked for 45 hours to meet general production requirements.
What is the direct labour charge for the week?
A. $320
B. $8,000
C. $9,000
D. $9,500

17. A manufacturing company has 20 employees, each paid a basic rate of $5 an hour. A standard
working week is 35 hours; 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

18. A manufacturing company operates a piecework wage system. Each employee is paid $6.00 per unit
for the first 30 units they produce each week and $7.00 per unit for units in excess of this amount.
There are 50 employees.
Assuming each employee produces 37 units per week, what is the total unit labour cost?
A. $6.00
B. $6.05
C. $6.19
D. $7.00

19. During the week ending 30 June 20X3 the direct production workers in a factory worked for 840 hours in
total. Of these 60 were idle time hours and 100 were overtime hours. The hourly rate of pay is $8.00
with overtime hours being paid at time and a half.
During the same week the indirect workers for 120 hours at a rate of $6.00 per hour with no overtime hours.
What is the direct labor cost and indirect labor cost for the week?
Direct Labor Cost Indirect Labor Cost
A $5,440 $2,400
B $6,240 $1,600
C $6,640 $1,200
D $6,720 $1,120

20. A business has incurred direct labor costs of $25,600 and indirect labor costs of $3,800. What is the
double entry required to record these?
D
A EBIT Wages control $29,400
CREDIT Work in progress $25,600
CREDIT Production overhead $3,800
D
B EBIT Wages control $29,400
CREDIT Work in progress $3,800
CREDIT Production overhead $25,600
D
C EBIT Work in progress $25,600

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DEBIT Production overhead $3,800
CREDIT Wages control $29,400
DEBIT Work in progress $3,800
DEBIT Production overhead $25,600
CREDIT Wages control $29,400

21. What is the name of the amount paid in excess of the normal hourly rate for overtime hours?
A Overtime payments
B Overtime premium
C Overtime excess
D Overtime special payment

22. If overtime is worked at the request of the customer how is the overtime premium normally treated?
A As a direct labor cost
B As an indirect labor cost

23. How is the cost of idle time hours usually treated?

A As a direct labor cost
B As a indirect labor cost
C Neither of the above

24. What is the double entry for direct labor costs?

A DEBIT Wages Control CREDIT WIP
B DEBIT Wages Control CREDIT Payables
C DEBIT WIP CREDIT Wages Control
D DEBIT Payables CREDIT WIP
25. A system where the amount paid per unit increases as the individual’s production increases is known as:
A Shiftwork
B Idle time work
C Bonus scheme
D Differential piecework
26. Aspects of payroll include:
1 Employer’s benefit contribution
2 Employee’s benefit contribution
3 Income tax
4 Salaries
Which of the above are costs to the employer?
A 1 and 4 only
B 2 and 4 only
C 2, 3 and 4 only
D 1, 2, 3 and 4
27. Consider the following statements:
1 Overtime payments are generally as indirect costs
2 The cost of idle time is generally treated as an indirect cost
Which one of the following is correct regarding the above statements?
A Both statements are correct

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B Both statements are incorrect
C Statement 1 is correct but statement 2 is incorrect
D Statement 1 is incorrect but statement 2 is correct

The following information is relevant to questions 32 and 33.

A direct labor employee works a standard 37 hour week with any additional overtime being paid at a
premium of 50% over the basic rate. The basic wage rate is $8 per hour.
28. In any week, if 40 hours were worked, what would the overtime premium be?
A $320
B $36
C $24
D $12

29. In any week, if 40 hours were worked of which 6 hours were idle time, what would the total direct and
indirect labor costs be?
Direct Indirect
A $332 Nil
B $296 $36
C $272 $60
D $248 $84

30. A differential piecework scheme specifies the following rates:

Up to 49 units per week $2.25 per unit
50 to 79 units per week $2.50 per unit
80 or more units per week $2.75 per unit
Only additional units qualify for higher rate.
If an employee produces 86 units in a week, how much will be paid?
A $185.75
B $204.00
C $204.50
D $236.50
31. A production worker in a car manufacturing company has a standard working week of 40 hours. In a
given week, they work 56 hours. 7 hours of overtime were worked at the request of a customer.
Idle time in the factory was 10 hours for the week due to a late delivery of materials from the company's
supplier.
The basic rate for production workers is $8/hour. Overtime is paid at one and a half times the basic rate.
What are the direct and indirect labor costs for the company?
Direct Indirect
A $368 $144
B $348 $116
C $448 $136
D $396 $116

32. A factory worker is paid on a piece rate basis. They are paid $1.50/unit for the first 100 units produced.
The rate increases to $2.00/unit for all units produced in excess of 100.
There is a statutory guaranteed minimum wage of $250.
What will the worker’s wage be if they produce 170 units?

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A $250
B $255
C $290
D $340
33. 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 sot
B. Factory overheads
C. Direct labour costs
D. Administrative overheads
34. Jaffa Co employs two types of labour: skilled workers, considered to be direct workers, and semi skilled
workers considered to be indirect workers. Skilled workers are paid $10 per hour and semi skilled $5 per
hour.
The skilled workers have worked 20 hours overtime this week, 12 hours on specific orders and 8 hours
on general overtime. Overtime is paid at a rate of time and a quarter.
The semi skilled workers have worked 30 hours overtime, 20 hours for a specific order at a customer’s
request and the rest for general purposes.Overtime again is paid at time and a quarter.
What would be the total overtime pay considered to be a direct cost for this week?
A. $275
B. $355
C. $375
D. $437.50

35. Analysis of the gross wages in a factory reveals:

Direct operatives Indirect operatives
$ $
Productive hours at basic rate 41,200 17,600
Overtime premium 1,100 450
Idle time 760
Group bonuses 2,780
Total gross pay 45,840 18,050
What amount would NORMALLY be accounted for as production overhead?
A. $18,050
B. $18,810
C. $21,590
D. $22,690
36. H&H operates an incentive scheme based on differential piecework. Employees are paid on the following
basis:
Weekly output up to: 600 units - $0.40 per unit
601-650 units - $0.50 per unit
650 units+ - $0.75 per unit
Only the additional units qualify for the higher rates.
In week 17, an employee produced 660 units.
What would be the gross pay for the week?
A. $260.40
B. $272.50
C. $325.75

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D. $488.25
37. A differential piecework scheme has a basic rate of $0.50 per unit. Output in addition to 500 units is paid
at higher rates. The premiums over and above the basic rate, which apply to additional units over the
previous threshold, are:
Output (units) Premium (per unit)
501-600 $0.05
Above 600 $0.10
What is the total amount paid if output is 620 unit?
A. $317
B. $318
C. $322
D. $372
38. An employee is paid on a piecework basis. The scheme as is follows:
1-200 units per day $0.15 per unit
201-500 units per day $0.20 per unit
>500 units per day $0.25 per unit
Only the additional units qualify for the higher rates. Rejected units do not qualify for the higher rates.
Rejected units do not qualify for the payment. An employee produced 512 units in a day of which 17
were rejected as faulty.
What wage is paid to the employee?
A. $128
B. $103
C. $99
D. $89

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