Sombrero, Mary Jomalene Cost Accounting and Control

Learning Activity 3-5

Self-Assessment/Review Questions: 
1. What is the portion of labor cost that is directly traceable to product, job, or activity?
- Direct Labor

2. It represents the cost of labor by the other workers that cannot be directly identified with the product.
- Indirect Labor

3. What are the two types of labor idle time and its treatment?
a. Normal Idle Time should be charged to Factory Overhead Control.
 Time lost in setting up the machine, tools, change over from one job to another.
 Stoppage of production due to machine breakdowns, materials shortage, and power
failure.
b. Abnormal Idle Time should be treated as period cost and charged operations.
 Excessive machine breakdown
 Excessive internal power failure
 Excessive waiting time for materials, instructions, etc.
 Excessive time incurred to rectify defectives
 Labor strike, lockout, fire, flood, etc.

4. What is the treatment of overtime when it is paid to complete the job at the request of the customer?
- Overtime Premium in general is treated as Factory Overhead.
 If paid due to the request of the customer (rush orders) – it is charged to a particular job.
 If paid due to abnormal causes – charged to profit or loss

5. What are those payroll deductions and contributions required by the Philippine Government?
Payroll Deductions and Other Contributions
a. Withholding Tax on Compensation – This is the tax withheld by the employer from the
employees’ salaries arising from employer-employee relationship.
b. Social Security System Contribution or SSS Contribution – Social insurance for workers in
private sector. Both employees (33%) and employers (66%) contribute to SSS based on table of
contributions provided by SSS.
c. Philippine Health Insurance Corporation Contribution or Philhealth Contribution –
Government social health insurance coverage for all Filipinos. Contribution shared equally by
employer and employee based on the contribution table provided by PHIC (2020 contribution
table 3% of basic salary with a salary floor 0f P10,000)
d. Home Development Mutual Fund Contribution or HDMF Contribution – popularly known
as PAG-IBIG (PAGtutulungan sa kinabukasan, Ikaw, Bangko, Industriya at Gobyerno). It was
established to improve the quality of life of its members through savings system. (Members can
avail their loan facility such as Housing Loan, Salary Loan) Both employee and employer have
their equivalent share in the HDMF Contributions.
e. Employee Compensation Commission Contribution or EC Contribution – It is Pursuant to
Presidential Decree No. 626. Employer is required to make contributions at fixed amount of
P10.00 per employee with salary monthly credit of P14,500 and below and a contribution rate of
0.2% for employees with salary monthly credit of P15,000. Paid by employer only and collected
by SSS.