/
Managing Cost and Finance Managing Cost and Finance

Managing Cost and Finance - PowerPoint Presentation

blindnessinfluenced
blindnessinfluenced . @blindnessinfluenced
Follow
342 views
Uploaded On 2020-06-15

Managing Cost and Finance - PPT Presentation

10 MA2 Ibrahim Hameem CIMA exam complete ACCA professional level student Diploma in Economics distinction Third year undergraduate reading for BSc Mathematics and Economics university of London ID: 778079

acca cost managing finance cost acca finance managing pay costs tax gross labor wages paid amount employee overtime hours

Share:

Link:

Embed:

Download Presentation from below link

Download The PPT/PDF document "Managing Cost and Finance" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.


Presentation Transcript

Slide1

Managing Cost and Finance MA2

Ibrahim Hameem(CIMA exam complete, ACCA professional level student, Diploma in Economics (distinction) , Third year undergraduate reading for BSc. Mathematics and Economics (university of London)

Slide2

Accounting for labor costs

This chapter looks at how remuneration is calculated and accounted for, and also how certain labor-related ratios can be calculated.

ACCA - Managing Cost and Finance

Slide3

Remuneration methods

Labor costs can arise from: • Basic wage or salary • Overtime premiums

Bonuses

Holiday pay

Sick Pay

• Payroll taxes Many countries pay wages and salaries under a ‘pay as you earn scheme’ which means that the employer deducts the employees’ income tax form the gross wage and pays that over directly to the tax authority. Only the net amount after tax is then paid to the employee.

ACCA - Managing Cost and Finance

Slide4

Employee remuneration can be based on the following approaches

A constant weekly or monthly amount An amount based on hours worked plus overtime An amount based on units produced

An amount based on productivity

An initial amount plus a bonus

ACCA - Managing Cost and Finance

Slide5

Question 01

Employees are paid $6/hour for a standard 40 hour week. Overtime is paid at time and one third. The employee is expected to make at least 80 units in a week, and to encourage productivity, each unit in excess of 80 will be generate an additional payment of $5 less any overtime premium that would relate to the time the additional unit would normally take. What is an employee’s wages in a week in which 90 units are made and the employee works 44 hours?$306 (40*6+5*10+(8-2)*4-2*4) = 306

ACCA - Managing Cost and Finance

Slide6

The effect of changes in remuneration methods and changes in productivity on unit labor costs

To increase competitiveness, employers will try to reduce unit costs and will often attempt to do this by offering employees productivity payments. Employers need to look at the before and after costs.Illustration Current scheme: $7/hour, 40 hour week.

Overtime premium = time and a half.

Usually 400 units are produced in 50 hours

Weekly wages = 50 x $7 + 10 x $3.5 = $385

Cost per unit = $385/400 = 0.9625

ACCA - Managing Cost and Finance

Slide7

The effect of changes in remuneration methods and changes in productivity on unit labor costs

Proposed scheme: rates as above, but in addition the overtime premium is paid on any hours saved. Assume that 50 units are now made in 44 hours Possible results: Hours saved = 50 – 44 = 6 Weekly wages = 44 x $7 +4 x $3.5 + 6 x $3.5 = 343

Cost per unit = 343/400 = 0.8575

ACCA - Managing Cost and Finance

Slide8

Gross and net earnings

Gross pay: the total amount earned by the employee Net pay: the amount paid to the employee after the employer makes deduction for income tax and certain statutory amounts. Total labor cost to employer: employees’ gross pay plus any additional payroll taxes (and perhaps pension costs) that the employer has to bear.

ACCA - Managing Cost and Finance

Slide9

Question 02

Will productivity related pay always result in better motivation and profitability for employees?No, not necessarily

ACCA - Managing Cost and Finance

Slide10

Example

An employee is paid at the rate of $10/hour. Tax and other deductions amount to 25% for weekly income in excess of $100 Employer payroll taxes = 10% gross wages

If an employee works 38 hours in a week, what are the employee’s gross pay, net pay and the total amounts that have to be paid by the employer to the tax authorities?

ACCA - Managing Cost and Finance

Slide11

Example

Gross wages 38 x $10 = $380 Tax and other deductions 25% x (380 – 100) = $70) Net pay $310

Payroll taxes $380 x 10% $38

Total payments by employer to tax authorities = $70 + $38 = $108

ACCA - Managing Cost and Finance

Slide12

Accounting for labor costs

In addition to being paid whilst working (basic, overtime premiums, productivity bonuses, employees are often also paid when: • on holidays •

ill

idle (because, say of machine breakdown)

The labor costs are classified as direct or indirect depending on what caused those costs:

Direct labor costs: all hours worked x normal hourly rate

Indirect labor costs: overtime premium, idle time, sick pay, holiday pay.

ACCA - Managing Cost and Finance

Slide13

Question 03

Under most systems of tax, what do employers pay to employees? A Gross wages B Gross wages less employees’ deductions less employers’ payroll tax C Gross wages less employees’ deductions

D Gross wages less employers’ payroll tax

ACCA - Managing Cost and Finance

Slide14

Managing Cost and Finance MA2

Ibrahim Hameem(CIMA exam complete, ACCA professional level student, Diploma in Economics (distinction) , Third year undergraduate reading for BSc. Mathematics and Economics (university of London)