ADMS 1000 Lecture Notes - Lecture 7: Barcode, The Need, Deutsche Luft HansaPremium
Course CodeADMS 1000
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ADMS 1000 Lecture 7 Notes – Measuring Direct Labour Cost, Computing predetermined
overhead rates, Using the Predetermined Overhead Rate and The Need for a Predetermined
• Direct labour cost is handled in much the same way as direct materials cost.
• Direct labour consists of labour charges that are easily traced to a particular job.
• Labour charges that cannot be easily traced directly to any job are treated as part of
• As discussed, this latter category of labour costs is termed indirect labour and includes
tasks such as maintenance, supervision, and cleanup.
• Today many companies rely on computerized systems (rather than paper and pencil) to
maintain employee time tickets.
• A completed time ticket is an hour-by-hour summary of the employee’s activities
throughout the day.
• One computerized approach to creating time tickets uses bar codes to capture data.
• Each employee and each job has a unique bar code.
• When beginning work on a job, the employee scans three bar codes using a handheld
device much like the bar code readers at grocery store checkout stands.
• The first bar code indicates that a job is being started, the second is the unique bar code
on the employee’s identity badge, and the third is the unique bar code of the job itself.
• This information is fed automatically via an electronic network to a computer that notes
the time and records all of the data.
• When the task is completed, the employee scans a bar code indicating the task is
complete, the bar code on his or her identity badge, and the bar code attached to the
• This information is relayed to the computer, which again notes the time, and a time
ticket, such as the one shown in Exhibit 5–3, is automatically prepared.
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• Because all of the source data are already in computer files, the labour costs can be
automatically posted to job cost sheets.
• For example, Exhibit 5–3 shows $75 of direct labour cost related to Job 2B47.
• This amount is automatically posted to the job cost sheet shown in Exhibit 5–2.
• The time ticket in Exhibit 5–3 also shows $15 of indirect labour costs related to
• This cost is treated as part of manufacturing overhead and does not get posted on a job
• Computers, coupled with technology such as bar codes, can eliminate much of the
drudgery involved in routine bookkeeping activities while at the same time increasing
timeliness and accuracy.
• The design was straightforward—59 black and white bars used to speed up the grocery
checkout line and give supermarkets a new tool to track their stock.
• But the Universal Product Code has become much more than that since it was first used
to read the price on a pack of gum in 1974.
• Today, bar codes are scanned more than 10 billion times a day around the world for
many different purposes, including tracking grocery sales and inventory, loading aircraft,
and tracking packages.
• Although more expensive to implement, radio-frequency identification devices (RFIDs)
are beginning to replace bar code scanning systems.
• The addition of RFID tags can be costly but can increase workflow efficiency.
• For example, Kumho Tire, of South Korea, places RFID tags in all of the tires it produces.
• Tags are implanted inside the inner liner of each tire, allowing Kumho to track
information about quality, performance, and time to manufacture.
• Kumho expects to cut about $9.5 million in annual production, quality control, and
logistics costs using RFID technology.
Computing predetermined overhead rates
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