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

Mehta Plastics has an annual workforce of 400 workers at the start of the year; during the year 30 workers left, 20 were discharged, and 50 new workers joined, of whom 30 were replacements for those who left or were discharged and 20 were additions for expansion. Closing strength is 400. Using the replacement method, labour turnover rate is:

Labour turnover by the replacement method is 7.5%. Only the 30 workers hired as replacements are counted, not the 20 expansion additions. Dividing 30 by the average workforce of 400 gives 7.5%. The 12.5% figure comes from the separation method, which is not asked here.

  1. A7.5%Correct
  2. B12.5%
  3. C5.0%
  4. D10.0%

Explanation

Replacement method counts only workers replaced: 30 replacements. Average workers = (400 + 400)/2 = 400 (opening 400, closing 400 as given). Rate = 30/400 = 7.5%. Separation method gives (30+20)/400 = 12.5%, and the flux method gives (50+50)/400 = 25%. Rs. 5% or 10% do not follow from the data.

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