What is Idle Time in Cost Accounting?

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  • 0:04 The Normal Production…
  • 0:29 Idle Time Defined
  • 0:39 Types & Causes of Idle Time
  • 2:03 Idle Time in Cost Accounting
  • 3:10 Reducing Idle Time
  • 3:45 Lesson Summary
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Lesson Transcript
Instructor: Ryan Morales
In this lesson, you'll be more acquainted with the concept of idle time, two types of idle time, the accounting treatment of idle time, as well as the causes of and the ways to reduce idle time.

The Normal Production Inefficiencies

Put yourself in the person of a production supervisor of your favorite soda drink. You work an eight-hour shift, but you very well know that actual production doesn't run straight 24/7; there will always be the existence of normal interruptions sometime during the process. There will be set-up time, there will be queue time, and of course, there will be machine breakdowns and employee break periods. Unfortunately, production inefficiencies do exist.

Idle Time Defined

Idle time is the time for which employees are paid, but for which they are not doing actual work. It's basically the unproductive time of employees, for which they're still compensated.

Types & Causes of Idle Time

Idle time can be caused by factors within and beyond the control of management. This leads us to two types of idle time. The first type is normal idle time. Normal idle time is brought about by factors that management cannot control. Such idle time is part of the normal operating cycle. For example, workers in your soda drink factory have to wait while machines are being set up or while there are the usual factory maintenance activities. Factory workers would also have personal breaks and short rest periods in between jobs. Further, there's normal unproductive time resulting from the inherent nature of the company's products. In an assembly line that manufactures products which require painting, for instance, workers of the next department will have to wait while the paint dries before they can advance to the next step in the production process. These causes are really unavoidable, but the goal of management is to shorten these unproductive times as much as possible.

The second type is abnormal idle time. Abnormal idle time is caused by factors which are controllable by management. This unproductive time is unnecessary in the process and often covers an extended period of time. Abnormal, extended unproductive time may be caused by factors such as a workers' strike or lockout, avoidable machine breakdowns, unavailability of raw materials and supplies, extended power failure, etc. These causes are very much avoidable.

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