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

Which of the following is treated as an abnormal idle time cost and is therefore charged to the Costing Profit and Loss Account rather than absorbed in the cost of production?

Idle time from a prolonged power failure is abnormal idle time. It is not an expected part of operations, so it is charged to the Costing Profit and Loss Account, whereas normal idle time such as setting-up, tea breaks and usual waiting is included in production cost.

  1. AIdle time caused by the normal setting-up of machines at the start of each shift
  2. BIdle time caused by a power failure lasting several hours due to a grid breakdownCorrect
  3. CNormal tea break time permitted under the factory rules
  4. DWaiting time between completion of one job and issue of the next job in the usual course

Explanation

Normal idle time is inherent in operations (setting up, tea breaks, usual waiting) and is absorbed in production cost through overheads. Idle time from abnormal causes such as a prolonged power failure is abnormal and is written off to the Costing Profit and Loss Account. The other options describe normal, expected idle time.

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