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WHAT IS LABOR?
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Salaries
•Fixed payments made regularly for
managerial or clerical services.
Wages
•Payments made on an hourly, daily, or
piecework basis to production workers.
Indirect Labor
• Costs incurred related to production but are
considered either too remote or too insignificant to be
charged directly to production.
• Charged to Factory Overhead Control Account.
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WAGE PLANS
Hourly
Piece Rate
Rate
Modified
Wage
HOURLY RATE
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PIECE RATE
Computed by employees’
output x rate per piece.
Provides incentive for the
employee to produce more.
Risk of sacrificing quality
in order to maximize
earnings.
MODIFIED WAGE
Combination of hourly
and piece rate.
Minimum hourly wage
plus additional payment
per piece if quota
exceeded.
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2/22/2017
Employee’s
Time Tickets earning
records
Production Payroll
Reports Summary
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2/22/2017
PhilHealth Contribution
• Benefits are enjoyed when the employee is hospitalized.
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2/22/2017
LABOR OVERHEAD
Shift Employer’s
Premium Payroll taxes
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2/22/2017
MAKE UP PAY
Companies pay a guaranteed minimum wage but they can earn
more if they produce more.
Sample: Lechon James is paid P20 per piece of work. He
produced 50 pieces. If guaranteed pay is P1,200, then the
difference between P1,200 guaranteed pay and P1,000 actual
pay is charged to FOH control account.
Work In Process 1,000
OVERTIME PREMIUM
Amount paid in excess of regular rate, to employees working
in excess of 8 hours in a day, or working during holidays or
their rest day.
Computed by Overtime Hours times Premium Rate.
Sample: Gay Allen worked for 45 hours @ P50 regular rate
during the week and he is paid time and a half.
Work In Process (45 hours x P50) 2,250
FOH Control (5 hours x P25) 125
Accrued Payroll 2,375
If overtime is caused by a requirement of a specific job,
charged to WIP instead of FOH.
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2/22/2017
SHIFT PREMIUM
Extra Pay to work during less desirable evening shifts
or night shifts.
Charged to FOH rather than WIP
Sample: Step Curry is assigned to night shift and is
paid a shift premium of P20 per hour
Work In Process (40 hours x P50) 2,000
FOH Control(40 hours x P20) 800
Accrued payroll 2,800