Page 74 - Essentials of Payroll: Management and Accounting

Accumulating T ime W orked
I N THE R EAL W ORLD CONTINUED
whose members summarized the information into a report that listed
the total hours worked at each workstation, by day, so that they
could determine when capacity utilization levels were reaching such
heights that new equipment had to be purchased or when levels
were so low that existing equipment could be sold. A brief discus-
sion with the production scheduling staff revealed that standard
capacity amounts per job were already stored in the labor routings
of the facility’s manufacturing resources planning (MRP II) system,
which produced a similar report by multiplying the units in the pro-
duction schedule by the hours per unit of production listed in the
labor routings. This meant that an alternative system could be used
to provide the industrial engineering staff with the information it
needed, without resorting to additional data entry to provide this
information.

Ms. North then perused sample time sheets submitted by employees
and noted that an average of three workstations were referenced on
each time sheet for each job on which work was performed. If she
could convince the management staff to eliminate the tracking of
time by workstation, she could cut the labor time spent by the direct
labor employees on timekeeping by two-thirds, plus similar amounts
by the data entry clerks who would otherwise have to enter and
correct this information, since these additional entries would no
longer have to be made. This worked out to a cost savings of
$19,912 per month ($29,869 x 2/3), or $238,950 per year.
Ms. North realized that the industrial engineering staff would agree
to this change only if she could prove that the data the staff
received from the MRP II system was sufficiently accurate to replace
the workstation capacity data it had been receiving from the time-
keeping system. To ensure that the MRP II system maintained a
high level of labor-routing accuracy (which was the prime driver of
the accuracy of capacity information produced by the MRP II system),
she added $50,000 back to her estimate of remaining timekeeping
system costs, which would pay for an engineer whose sole purpose

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