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

Rohini Textiles had the following for the month: 40 workers, each normally working 200 hours, with a time rate of Rs 90 per hour. Actual idle time due to a power failure was 400 hours in total, which is classed as normal idle time. Wages for all hours paid were charged first to wages control. What amount of idle time cost should be charged to production overheads (normal idle time) from this?

Rs 36,000 is charged to production overheads. Idle time cost is the idle hours multiplied by the hourly rate, which is 400 hours times Rs 90. Because the power failure is normal idle time, it is absorbed into factory overheads rather than charged to a job directly or to costing profit and loss.

  1. ARs 36,000Correct
  2. BRs 7,20,000
  3. CRs 3,60,000
  4. DRs 3,24,000

Explanation

Idle time cost = idle hours x rate = 400 x 90 = Rs 36,000. Normal idle time is charged to factory overheads and absorbed by production. Rs 7,20,000 is total wages (40 x 200 x 90), a wrong base. Rs 3,60,000 results from a decimal slip.

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