Study Notes management accounting acca f2

Labour 
Labour represents the 
human contribution to production
and is an important cost factor requiring 
constant measurement, control and analysis. It can be classified as: 
● 
Direct Labour Cost 
can be specifically traced to or identified with a particular product/service. They 
are directly involved in making a product.
 
 
Examples: 
Wages of operative assembling parts into finished products, Teachers, etc
 
● 
Indirect Labour Cost
not charged directly to a product.
 
 
Examples: 
Instructor’s salary, supervisor’s salary, maintenance worker’s salary, etc.
 
PLANNING AND CONTROLLING PRODUCTIVITY
Production levels can be raised by
➢
 
Working overtime 
➢
 
Hiring extra staff 
➢
 
Sub-contracting some work to an outside firm 
➢
 
Managing the work force so as to achieve more output 
Productivity if improved, the company will enable to produce its products in less hours therefore it will 
reduce labour cost. 
 
Production levels can be reduced by
➢
 
Cancelling overtime
➢
 
Laying off staff 
RECORDING LABOUR COST
Several departments are involved in the collection, recording and costing of labour. These include: 
➢
 
Personnel; 
➢
 
Production planning; 
➢
 
Timekeeping: responsible for recording the attendance time and the time spent in the factory and 
spent on particular job by each employee; 
➢
 
Payroll: Labour costs paid to employees according to records; 
➢
 
Cost accounting. 
Records showing how each employee's pay has been calculated are known as