When workers are paid on time basis there is usually a difference between the time for which the workers are paid and the time actually spent by them in production. The loss of time for which the employer pays but obtains no direct benefit is termed as idle time.
In other words, Idle time cost represents the wages paid for the time lost, i.e., time during which the worker was idle.
Causes of idle time
The causes of idle time can be classified into the following groups:
- According to controllability
- According to functions.
According to the controllability classification, the causes are:
- Normal idle time such as time lost between gate and place of work, time interval between one job and another, rest pauses, tea break, tool setting time, time taken to adjust machines etc.
- Abnormal idle time due to break downs, scarcity, non-availability of raw materials, negligence of supervision, strikes or lockouts.
The idle time may be due to avoidable causes i.e., the causes can be controlled and due to unavoidable causes, i.e., the causes beyond control.
Normal idle time occurs due to unavoidable causes and abnormal idle time occurs due to avoidable causes.
The classification according to functions, the functional causes of idle time are analyzed as the treatment depends on the causes affecting idle time. The causes can be classified as follows:
- Productive causes;
- Administrative causes; and
- Economic causes.
The productive causes can be listed as follows:
- Machine breakdown;
- Unutilized manpower;
- Waiting for work;
- Power cuts;
- Waiting for tools/raw materials;
- Waiting for instructions.
Time lost due to the causes mentioned above can be controlled internally. Proper planning helps control.
All engineering organizations should prepare a report showing lost and setting time. The departments in which time was lost can be identified and effective remedial measures taken. It is charged as an item of departmental overhead.
Idle time arising due to administrative causes is:
- Poor planning,
- Delayed/unproper instructions,
- Unutilized capacity due to management decisions.
Idle time arising due to these uncontrollable causes cannot be controlled. It is recovered as a part of general works overhead.
Idle time arising due to economic causes is:
- lack of demand resulting in unutilized capacity,
- lock outs and strikes,
- Non-dismissal of workers in the off-season in the case of seasonal industries.
Such idle time is not a part of cost of production. It is directly transferred to Costing Profit and Loss Account.
Accounting Treatment of Idle Time
Idle time cost arising due to normal and unavoidable causes should be charged as overheads and those due to abnormal causes should be charged to Costing Profit and Loss Account.
Normal idle time such as loss in tool setting etc. can be charged at inflated rate. Jobs are charged at inflated rate.
