Question

how is the leave allowance and idle time allowance calculated?

Answer 1

Answer:-

Idle Time Idle Time Cost represents the wages paid for the time lost during which the worker does not work, i.e time for which wages are paid, but no work is done. As per CAS-7 (Limited Revision 2017), Idle Time is ‘The difference between the time for which the employees are paid/payable to employees and the employees time booked against the cost object’. This happens because due to various causes for which he is not responsible, the worker remains idle but full wages are paid to him. Even for workers who are paid on the basis of output, idle time payment may be required to be made. The causes leading to idle time may be broadly classified into four categories, viz.:- (i) Normal, inherent or unavoidable idle time: Time lost between the gate and place of work, break for tea, time interval between one job and another, time for tool setting, adjustment of machine, etc. (ii) Normal idle time such as waits for jobs, tools, materials or instructions, small power failures, small breakdown of machines and tools, and atmospheric conditions (iii) Abnormal idle time such as those arising due to breakdown for considerable period, non-availability of raw materials, slack supervision, strikes or lock-outs, fire flood, storm, etc. (iv) Concealed idle time such as manipulation of job breaking, wastage of time due to underemployment, i.e., unnecessary work like cleaning, grass cutting and gardening to employ idle men, and employment of skilled workers on unskilled jobs Idle time should not be booked directly to jobs or production orders because such a practice not only increases the cost of direct labour, but also vitiates comparison of idle time costs from time to time. In booking of time, idle or waiting time should not normally record in the job card but on separate idle time cards. Separate cards or registers may be provided for recording idle time according to the causes which give rise to it.

Treatment of Idle Time :- Idle Time Cost shall be assigned direct to the cost object or treated as overheads depending on the economic feasibility and specific circumstances causing such idle time. Treatment of different categories of Idle Time are as below:- (a) Unavoidable idle time above would be for insignificant periods. In Cost Accounts, this is allowed to remain merged in the Production Order or Standing Order Number on which the worker was otherwise employed. (b) Normal Idle Time is booked to factory or works overhead. For the purpose of effective control, each type of idle time, i.e., idle time classified according to the causes is allocated to a separate Standing Order Number. (c) Abnormal Idle Time would usually be heavy in amount involves longer periods and would mostly be beyond the control of the management. Payment for such idle time is not included in cost and is adjusted through the Costing Profit and Loss Account or included in Profit and Loss Account, when the accounts are integrated. (d) Tendency to conceal Idle Time should be discouraged. It is a non-effective time and the resultant loss of profit due to reduced production activity but also increases the cost per unit of production as the fixed costs continue to be incurred, irrespective of the reduced quantum of production due to loss of labour time. Idle Time should, therefore, be highlighted prominently so that action can be taken to remove the causes thereof. Although for obvious reasons, it is not possible to record minor details, vigilance is necessary for finding out long-term idleness among the workers.

Practically, this means that an employee's minimum annual leave entitlement is calculated by multiplying their regular working days by three – e.g. if an employee works five days a week, they are entitled to at least 15 days annual leave each year (5 x 3 = 15)

To calculate idle time, we simply deduct the actual working hour from the total standard hour, the difference is idle time. It shows the number of hours which company spends without getting anything.

We can calculate idle time per employee, by the departments, or a whole company. Management should calculate idle time by department or processing stage which easies to find causes and solutions.

Idle Time Ratio = (Idle Hour/Total Working Hour)x100%