MANAGEMENT ACCOUNTING

Management Accounting

Management Accounting

Solution 1:

ABC Costing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost Figures

 

 

Per unit time (hour)

1

 

Per hour wage

$ 10.00

 

Week (hours) (a)

38

 

Total Period (weeks) - (B)

4

 

Total Weekly Hours (A*B)

152

 

Additional Premium for extra hours (wage *1.50)

50%

$ 15.00

Bonus paid to the workers (Wage*0.80)

80%

$ 8.00

Hours worked

 

extra hrs

Joe (165-152)

165

13

Jack

165

13

Jonny

170

18

Planned production (A)

500

 

Actual Production (B)\

560

 

Extra production (A-B)

60

 

Total bonus for employees

$ 480.00

 

Statement for Actual Labour Cost period

Joe

Jack

Jonny

Basic Pay (Weekly hours*per week wage)

$1,520

$1,520

$1,520

Overtime Premium (Extra hours*per week wage)

$ 195 $ 195 $ 270

Bonus (Extra production*additional wage)

$ 160 $ 160 $160

Total

$1,875 $ 1,875 $ 1,950

An overtime premium must be treated as a proper transaction that was incurred during the costing of the business. The overtime premium has got a lot of value because its calculation is based on the extra hours the employees worked and a certain percentage is assigned on the basic pay of the employee in order to pay them their overtime premium. In this particular case, three employees Joe, Jack and Jonny worked extra hours as compare to their official total working hours and there was a need for all of them to receive an overtime premium. For instance, Joe and Jack worked 13 hours extra and they were paid an additional premium of around 50% and Jonny worked 18 extra hours that made him to receive the highest premium as compare to other employees. This is the reason why it is important to incur the overtime premium transaction as a proper entry in the accounting literature. Therefore, this is the overall importance of the entry for overtime premium in the cost accounts.

Solution 2:

There are three popular stock methods that can turn out to be quite useful for the Somerset in properly maintaining the records related to large number of stocks. These ...