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CA Intermediate · Cost and Management Accounting · Employee Cost and Direct Expenses

Ganga Components employs 400 workers on average in a year. During the year 60 workers left and 20 were replaced; additionally 40 new workers were recruited for an expansion. Using the Replacement method, and the Separation method, the labour turnover rates are respectively:

The replacement rate is 5% and the separation rate is 15%. Replacement counts only the 20 workers hired in place of leavers against 400 average workers. Separation counts all 60 who left against the same average, which gives 15%. Expansion hires are ignored in the replacement method.

  1. A5% and 15%Correct
  2. B10% and 15%
  3. C5% and 10%
  4. D15% and 5%

Explanation

Replacement method = replacements / average workers = 20/400 = 5%. Separation method = separations / average workers = 60/400 = 15%. Accession (new recruits 40 + 20 replacement = 60) would also be 15% but is a different measure. The 10% option wrongly counts only the 40 expansion recruits.

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