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The payback period is the length of time it takes to recover the amount of cash inflow investedinto a capital project. It is the time it takes the cash inflows from a capital investment project toequal the initial cash outlay. It is usually expressed in years. It is a way of assessing the viability of … Read More
Capital expenditure occurs when a business spends money in purchasing non-current assets for the business operations or when it spends money in adding value or improving an existing non-current asset. This will include delivery and legal costs in acquiring the non-current assets. Non-current assets are items owned by the business which have some longevity andwill … Read More
A bonus payment is an extra payment made to an employee as a reward. The basicprinciple of a bonus payment is that the employee is rewarded for any additionalincome generated or savings in cost to the organisation. Bonuses may be paid to employees for a variety of reasons. An individual employee, adepartment, a division or … Read More
This gives the employee some security if the employer does not provide enough workin a particular period. The way that system works is that if an employee’s earnings forthe amount of units produced in the period are lower than the guaranteed amount thenthe guaranteed amount will be paid to the employee. Illustration: Fernando is paid … Read More
This is also known as payment by results or piecework. This is a direct alternative totime related pay. Employees paid under an output related pay method are paid a fixedamount per unit of output achieved, irrespective of the time spent in production. As far as an employee is concerned, payment by results means that they … Read More
This is the amount over and above the normal hourly rate that employees are paid forovertime hours worked. It is common to be paid an enhanced rate for any overtimehours worked, for example, an individual may be paid £20 per hour and any overtimehours worked can be paid at time and a half rate, this … Read More
Employees paid under a time related pay method are paid for the hours that theyspend at work regardless if the amount of production and output that they achievewithin that time. Time related pay employees can be split into salaried employeeswho may be paid monthly or weekly for a specified number of hours per week orhourly … Read More
For budgeting purposes, management need to be able to predict how costs will varywith differing levels of activity. For example, if a furniture manufacturer expected toproduce 1,000 chairs in a month, what should he budget for the costs of wood,labour, oil, selling price, factory heating, etc? How would these costs differ, if at all, ifhe … Read More
To make calculating cost per unit easier, costs are split into the following categories: Direct costs – This is an item of cost that is traceable directly to a unit of productionproduced by a manufacturing organisation or a unit of service delivered by a servicedelivery organisation. The total of all direct costs is known as … Read More
Costs can be split into three elements: Materials – these will include raw materials for a manufacturer, costs of goods to beresold in a retail organisation or service items or consumables to be used within abusiness operation. Labour – these will include all salary and wages costs to employees, includingovertime, commissions and bonuses. Other expenses … Read More