- 20 Marks
IMAC – NOV 2021 – L1 – Q4 – Accounting for Inventory and Labour | Standard Costing and Variance Analysis
Calculation of direct and indirect labour costs, examples of inventory costs, and explanation of uses of standard costing.
Question
a) Asase Aban Ltd pays some of the employees on a time basis but is subject to a monthly minimum wage of GH¢800 as directed by the Government of Ghana. For one of the months, the following data were extracted from the timesheet of the company:
| SRN | Name | Staff Number | Number of hours |
|---|---|---|---|
| 1 | Kwame Sarfo | K00324 | 262 |
| 2 | Ajoa Mansa | A00225 | 240 |
| 3 | Salomy Adiku | S00552 | 180 |
| 4 | Joseph Asiedu | J00654 | 332 |
| 5 | Thomas Tinge | T00724 | 204 |
The hourly rate was GH¢4.00, the minimum hours to be worked by each staff beyond which overtime can be paid is 224 per month. All overtime attracts a premium of GH¢1.50 per hour.
Required: i) Calculate the direct labour cost for the month. (8 marks) ii) Calculate the total indirect labour cost for the month. (2 marks)
b) Most businesses overlook their actual inventory cost, but in reality, the inventory price is more than its purchase price. It is because it includes the cost of ordering, as well as the cost of storing and maintaining until sales happen. Therefore, for assessing inventory value, every business must consider carrying or holding cost and ordering cost, together with the purchase price.
Required: i) State TWO (2) examples of inventory ordering costs. (2 marks) ii) State THREE (3) examples of inventory holding costs. (3 marks)
c) Explain TWO (2) uses of standard costing. (5 marks)
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