Skip to content

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

In a factory, the time spent by workers because of a power failure, for which they are paid wages but no production takes place, is called idle time. How should the wages paid for this idle time be treated in cost accounting when the power failure is a normal, expected occurrence?

Wages for normal idle time are treated as part of factory overheads and absorbed into production cost. Normal idle time is expected and unavoidable, so its cost belongs to products. Only abnormal idle time is written off to the Costing Profit and Loss Account.

  1. ACharged to Costing Profit and Loss Account
  2. BTreated as part of factory overheads and absorbed in productionCorrect
  3. CAdded directly to the wages of a particular job
  4. DTreated as an abnormal loss and written off

Explanation

Normal idle time is an unavoidable part of operations. Its cost is included in factory overheads and spread over production. Abnormal idle time is the type charged to Costing Profit and Loss Account, so the first option is wrong for a normal case.

Did you get it right without looking?

One question tells you little. A timed set on Employee Cost and Direct Expenses shows your real accuracy, how long you take and where you lose marks.

Practise Employee Cost and Direct ExpensesFree diagnostic mock

More Employee Cost and Direct Expenses questions