ACCA MA · Chapter 5
Accounting for labour MCQs with Answers
10 multiple-choice questions on Accounting for labour for ACCA MA Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
During a year a company had 380 employees at the start and 420 at the end. 30 employees left, and 24 of these were replaced. What is the labour turnover rate?
- A) 7.5%
- B) 6.0%
- C) 5.7%
- D) 6.3%
Show answer & explanation
Answer: B) 6.0%
Labour turnover = number of replacements / average number of employees x 100. Average employees = (380 + 420) / 2 = 400. Turnover = 24 / 400 x 100 = 6.0%. Using all 30 leavers would give 7.5%.
Question 2
In a month, a department worked 4,400 hours and produced output worth 4,620 standard hours. Budgeted hours were 4,800. What was the labour efficiency ratio?
- A) 105.0%
- B) 91.7%
- C) 96.3%
- D) 95.2%
Show answer & explanation
Answer: A) 105.0%
Efficiency ratio = standard hours of output / actual hours worked x 100 = 4,620 / 4,400 x 100 = 105.0%. The capacity ratio would be 4,400 / 4,800 = 91.7%, and the production volume ratio 4,620 / 4,800 = 96.3%.
Question 3
Budgeted labour hours for a period were 5,000. Actual hours worked were 4,500, and the standard hours for the output achieved were 4,800. What is the production volume ratio?
- A) 96.0%
- B) 90.0%
- C) 106.7%
- D) 93.8%
Show answer & explanation
Answer: A) 96.0%
Production volume ratio = standard hours of output / budgeted hours x 100 = 4,800 / 5,000 x 100 = 96.0%. It equals the efficiency ratio (4,800 / 4,500 = 106.7%) x the capacity ratio (4,500 / 5,000 = 90.0%): 1.067 x 0.90 = 0.96.
Question 4
Direct workers worked overtime at a customer's specific request so that the customer's job could be finished early. How should the overtime premium be treated?
- A) As a direct cost of that customer's job
- B) As a production overhead spread over all jobs
- C) As an administration overhead
- D) As a cost written off directly to profit or loss as an abnormal item
Show answer & explanation
Answer: A) As a direct cost of that customer's job
Overtime premium is normally a production overhead, because it usually arises from the general workload and it would be unfair to charge it to whichever job happened to be done during overtime. When overtime is worked at a specific customer's request, the premium is caused by that job, so it is charged to it as a direct cost.
Question 5
A direct production worker is paid $15 per hour. In one week she worked 40 basic hours and 6 overtime hours, paid at time and a half. The overtime was caused by a generally high workload. What is the direct labour cost for the week?
- A) $735
- B) $690
- C) $600
- D) $645
Show answer & explanation
Answer: B) $690
Direct labour = all hours worked at the basic rate = 46 x $15 = $690. The overtime premium of 6 x ($15 x 0.5) = $45 is treated as production overhead because it comes from general workload. Total gross pay is 690 + 45 = $735.
Question 6
A worker is paid a piecework rate of $0.80 per unit, with a guaranteed minimum of $12 per hour based on a weekly calculation. In one week he worked 38 hours and produced 520 units. What is his gross pay for the week?
- A) $456
- B) $416
- C) $40
- D) $872
Show answer & explanation
Answer: A) $456
Piecework earnings = 520 x 0.80 = $416. Guaranteed minimum = 38 x 12 = $456. The worker receives the higher of the two, so gross pay is $456.
Question 7
A differential piecework scheme pays $1.00 per unit for the first 500 units, $1.20 per unit for units 501 to 700, and $1.50 per unit for every unit above 700. Each rate applies only to units within its band. What is the pay for an output of 760 units?
- A) $1,140
- B) $912
- C) $830
- D) $760
Show answer & explanation
Answer: C) $830
Pay = (500 x 1.00) + (200 x 1.20) + (60 x 1.50) = 500 + 240 + 90 = $830. Applying the top rate to all 760 units ($1,140) is wrong, because each rate applies only to the units in its own band.
Question 8
Which of the following is a preventive cost of labour turnover?
- A) Cost of advertising for replacement staff
- B) Cost of training newly recruited employees
- C) Lost output while new employees learn the job
- D) Cost of improving working conditions and staff welfare schemes
Show answer & explanation
Answer: D) Cost of improving working conditions and staff welfare schemes
Preventive costs are spent to reduce the number of staff leaving, for example better working conditions, welfare, pension schemes and career development. Advertising, training new staff and lost output are replacement costs that arise after employees have left.
Question 9
Which accounting entry records indirect production wages in an integrated cost accounting system?
- A) Debit Work in progress account; Credit Wages control account
- B) Debit Wages control account; Credit Production overhead control account
- C) Debit Production overhead control account; Credit Wages control account
- D) Debit Statement of profit or loss; Credit Wages control account
Show answer & explanation
Answer: C) Debit Production overhead control account; Credit Wages control account
The wages control account is credited as wages are analysed out. Direct wages are debited to work in progress, while indirect production wages are debited to the production overhead control account and later absorbed into production.
Question 10
A worker is paid $16 per hour plus a bonus of 50% of the time saved, valued at the hourly rate. A job has a time allowance of 12 hours and the worker finished it in 9 hours. What is the worker's total pay for the job?
- A) $168
- B) $192
- C) $144
- D) $24
Show answer & explanation
Answer: A) $168
Basic pay = 9 hours x $16 = $144. Time saved = 12 - 9 = 3 hours. Bonus = 50% x 3 x $16 = $24. Total pay = 144 + 24 = $168. Paying a bonus for all the time saved would give $192.