Manpower Cost: Category and Calculation

Definition of Manpower Cost

To produce products, both goods, and services, companies need labor. Well, company must pay the costs. For the performance carried out by the workforce are what is meant by manpower cost. Usually, the amount of these costs is obtained from the labor rate. With the number of direct working hours. Manpower costs are components in the cost. Also, the company must calculated the production cost. . Generally, this element is the biggest in the company’s daily operations.

Manpower Cost

Manpower cost is further divided into several groups and types. For calculation. You can included some of them as production costs. While others are part of overhead costs.

This division is based on several things as follows.

Manpower Cost Grouping According to Main Function

This division is based on the main functions within the company organization, which are as follows.

Production Cost: for example, factory manager salaries, operator overtime wages, and so on.

Marketing Cost: for example, sales commission, marketing employee welfare, and so on.

General and administrative costs: for example, salary and welfare benefits for personnel employees.

Labor Cost According to the Type of Work

This division is based on the nature of the work of employees in a department. For example, in the production department, they have three categories. Foreman wages, supervisor wages, operator fees, and so on.

Manpower Cost according to its relationship to the product

This division is based on the product produced. There are two categories. Direct manpower cost and indirect manpower cost. Direct Manpower Cost is employees cost who are involved in the production process directly. This labor wage is included in the component of production costs. Indirect Manpower Cost is Costs for employees who are indirectly involved in the production process. This labor wage is included in the component of overhead costs.

How to Calculate Labor Cost

In general, manpower cost consist three components. Namely regular salaries and wages, overtime premiums, and other costs related to labor.

The calculation of employee wages in each company is different, but one that is quite common is multiplying the hourly wage rate by the hours worked in a certain period. Overtime counted If the employee works longer than his regular working hours. For example, the obligation is 8 hours per day, but the employee works up to 10 hours. Furthermore, calculating the cost of labor itself consists of four stages as follows.

Make a list of salaries and wages

You can make payrolls through employee attendance or attendance cards. The relevant departments will make a recapitulation of salaries and wages. There are four aspects or sections. Namely the production, marketing, administration, and general sections. There are two aspects. Direct and indirect wages. After that, the accounting department makes a journal like the following: Overhead Cost, Marketing Fee, Administration, and General Fees, Cost in Process, Salary and Wages. You must make list about it.

Make Proof of Cash Out

The finance department then makes proof of cash out and checks for making money. Based on the list of salaries and wages. Later, the accounting will re-make the journal as follows. Salaries and Wages, Salaries and Wages Payable, Employee Income Tax Payable

Salary Distribution

Once the check is successfully cashed, the funds are then distributed to each employee. In the manual recording, employees must sign on the list of salaries and wages. After received salaries and wages. As proof that their rights have been received according to the stated value. Next, the accounting will re-create a report about Salaries and Wages Payable, Cash, and State Tax deposits.

Income tax into the state treasury

The final step is to deposit income tax into the state treasury. The accounting department must also record these details in a journal like Employee Income Tax Payable and Cash.

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