Page 54 - Essentials of Payroll: Management and Accounting

CHAPTER 2
Accumulating Time Worked 1

After reading this chapter you will be able to

• Determine the appropriate amount of information to col-
lect through a time-tracking system
• Determine the level of automation required to collect labor
data in the most cost-effective manner
• Select appropriate timekeeping reports for management
review
• Calculate the cost-effectiveness of a labor data collection
system

n some industries, labor costs still comprise such a large proportion of
total costs that it is mandatory to carefully track and evaluate these costs.

IThis chapter explores the need for timekeeping, how to collect labor
data, the costs to assign to the resulting data, and the kinds of reports that
can be generated for further analysis.It also points out the problems inher-
ent to timekeeping and explains how they can be avoided.

The Need for Time Tracking

Three types of costs are incurred by any organization: direct materials,
overhead, and direct labor. Historically, the largest of these three types of
cost was either direct materials or labor.This necessitated the creation of

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