Cost Accounting

What is Idle Time in Cost Accounting

In cost accounting, idle time is when a production resource is available but not used. Idle time can occur for several reasons, such as when a production line is shut down for maintenance or when there is a shortage of raw materials.

In many factories, idle time is a major source of inefficiency and wasted resources. When idle time is not properly managed, it can lead to significant increases in the cost of production.

Let’s understand the concept of idle time in cost accounting along with types of idle cost. We will also understand how to manage idle time.

Types of Idle Time

There are two main types of idle time:

Normal idle time is inherent in the production process and is unavoidable. It includes time spent on activities such as:

Machine setup and maintenance: Time spent setting up machines for production and performing routine maintenance.

Material handling: Time spent moving materials from one location to another.

Quality control: Time spent inspecting products to ensure they meet quality standards.

Employee breaks and personal time: Time spent on employee breaks, lunch, and personal hygiene.

Abnormal idle time is caused by factors that are avoidable and can be controlled. It includes time spent on activities such as:

Equipment breakdowns: Time spent repairing or replacing malfunctioning equipment.

Material shortages: Time spent waiting for materials to arrive.

Production delays: Time spent waiting for other parts of the production process to catch up.

Employee absenteeism and tardiness: Time spent due to employee absences or late arrivals.

How to Minimise Idle Time?

There are some ways to manage and reduce idle time. One common approach is to use work order sequencing to ensure that production resources are used as efficiently as possible. Work order sequencing is a process of organising and scheduling work orders to minimise the amount of time that production resources are idle.

Another approach to reducing idle time is to implement just-in-time production. In just-in-time production, raw materials and components are only delivered to the production line as needed. This approach eliminates the need for inventory storage and reduces the risk of production delays due to shortages of materials.

Idle time can also be reduced by improving communication and coordination between different parts of the production process. For example, installing a real-time monitoring system can help to identify bottlenecks and other issues that cause production delays.

Improving the management of idle time is an important part of reducing the cost of production. By reducing idle time, factories can become more efficient and productive.

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