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

Which of the following is treated as an idle time cost arising from a normal cause in cost accounting for employees?

Wages paid for routine breaks within the allowed limit are normal idle time, because such time is unavoidable in normal operations. It is absorbed in production cost through overheads. Strike, fire and flood idle time is abnormal and is written off to the Costing Profit and Loss Account.

  1. AWages paid for a short tea break that is part of the standard factory routine, within the allowed limitCorrect
  2. BWages paid during a strike lasting several days
  3. CWages paid for time lost due to a fire that destroyed the shop floor
  4. DWages paid for time lost because of a flood damaging the plant

Explanation

Normal idle time arises from unavoidable causes such as routine breaks, time taken to move between jobs and waiting for tools. Its cost is absorbed into production overheads or the cost of the output. Strikes, fire and floods are abnormal causes, so their idle time cost is charged to Costing Profit and Loss Account.

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