Page 61 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
at all; instead, the standard labor hours are stored in the labor routings
database for each product and multiplied by the amount of production
completed each day, which yields a standard amount of labor that should
have been completed for each workstation in order to complete the total

amount of production issued. This method is only good for developing
approximations of the amount of labor that was needed to complete each
step in the production process. It is of no use for spotting labor ineffi-
ciencies and cannot be used to derive payroll (since it does not report
hours worked at the employee level, nor would these numbers be accu-
rate even if it did so). Thus, the backflushing method, though a simple
way to derive approximate labor hours, does not yield accurate informa-

tion for most purposes to which direct labor information is applied.
It should be apparent from this discussion that a higher degree of
data accuracy and a lower cost of timekeeping on a per-transaction basis
can only be achieved with a high degree of expensive automation—
and the more information required from the system,the more expensive
it will be to collect it. Accordingly, you must first determine how badly
a company needs each possible type of direct labor data, then structure
the data collection system based on the level of need.Before making this

T IPS &T ECHNIQUES

Though the cost of an automated timekeeping unit is quite high, do
not spend too little and buy too few of these units if you have to record
the time for a large number of employees. If you do, employees will
waste an inordinate amount of time queuing up in front of the units,
waiting to enter their time. A more cost-effective approach over the
long term is to buy extra units and position them near the most heav-
ily used facility entry and exit points, with additional units on both
sides of the highest-traffic areas. This will preclude employees stand-
ing in lines at the machines.

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