Page 72 - Essentials of Payroll: Management and Accounting

Accumulating T ime W orked
I N THE R EAL W ORLD CONTINUED
It was apparent from the time sheet that each employee must care-
fully enter a large amount of information during the course of a shift.
Also, the information entered by the employee in the example was
not easy to read, making it likely that the person who entered this
information into the computer would have a difficult time doing so
correctly. Further, many time sheets were submitted each day by the
412 direct labor personnel at the facility, some of which were lost
by employees or during the data entry process. This information had
to be re-created, which could only be done through estimates of the
work an employee completed during the period.

Ms. North found that these three issues gave rise to three different
types of costs. The first cost was the time required by employees to
enter their time worked onto each time sheet and then transport
that time sheet to the payroll office for data entry. The second cost was
for the data entry staff to initially enter the data into the computer;
the third cost was to track down and correct any missing information
or to correct data that was inaccurately entered. Ms. North calculated
these costs for a typical month in the following manner:

Cost to initially record data. She estimated that each employee
required 10 minutes per day to complete and deliver his or
her time sheets. Since the average burdened cost per hour for
all 412 employees was $17.92, this resulted in a monthly
cost of $25,869 to collect the information, assuming 21 busi-
ness days per month (412 employees x 21 days x
$2.99/day).

Cost to enter data into computer system. She found that one
and a half employees were required in the accounting depart-
ment on a full-time basis to enter into the computer system the
information from all 412 time sheets. These hourly employees
earned a burdened wage of $12.05 per hour. This resulted
in a monthly cost of $3,037 (1.5 employees x 21 days x 8
hours/day x $12.05/hour.)

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